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Fees of Closing

Posted by  on Apr 16, 2009
 
There are several fees that you will have to make during the closing, and depending on prior negotiations, the buyer or the seller could be responsible for these costs, although the most of it is paid by the buyer. If you want to make sure you are paying the least amount possible in closing cost fees, you should get at least three Good Faith Estimates from mortgage lenders. This is only an estimate and the actual charges may differ. RESPA allows the borrower to request to see the HUD-1 Settlement Statement that shows all actual charges imposed on borrower in connection with the settlement one day before the settlement. If you see a charge that doesn't make sense, or that no other lender has, it's time to ask questions.

One fee that people forget they have to take care of is the application fee. This covers the lender's cost to process the information on your loan. Usually, you must pay this charge at the time you file the application. Some lenders may apply the cost of the application fee to certain closing costs. The other thing that people have to take care of is paying the appraisal Fee. This fee pays for an independent appraisal of the home you want to purchase. The lender requires this estimate of the market value of the house for the loan. Factors to be considered in determining market value are: present cash value; use; location; replacement value of improvements; condition; income from property; net proceeds if the property is sold, etc. The appraisal is a critical factor in determining how much of a mortgage the bank or mortgage company will approve. After the appraisal is completed, the borrower is normally entitled to a copy of the appraisal from the lender.

Keep in mind that points are equal to a percent of the loan amount. 1.75 points is equal to 1.75% of the loan amount. Discount points represent additional money you can pay to the lender at closing. If you pay more points it will lower the interest rate. Usually, for each point you pay for a 30-year loan, your interest rate is reduced by about 1/8th (or .125) of a percentage point. Paying points can be good if you plan on living in the home for a long time.

Origination fees are often expressed as a percentage. Origination Points charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan. A one percent loan origination fee is equal to one percent of the loan amount. Some lenders add origination points into their quoted points while other lenders add an origination point in addition to their quoted points.

Another fee is a title search, which is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title. A title search can show a number of title defects among these are unpaid taxes, unsatisfied mortgages and judgments against the seller.

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