Closing Cost

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When purchasing a home there are fees and expenses associated throughout the buying process. One of the biggest expenses that home buyers face are Closing Cost. So, what are closing costs? 

It's important to become familiar with the fees that make up your closing costs. Some fees will be related to the mortgage and some will government imposed.

Application fee: A loan application fee may be charged by the lender to process your mortgage application. Ask the lender for details before applying for a mortgage.

Appraisal Fee: An appraisal fee covers the cost of having a professional appraiser look at a home and estimate its market value. In most cases, the buyer pays the fee for the appraisal at closing.

Credit Report Fee: A fee charged to obtain a credit report on the buyer. A credit report that is requested by the lender during the financing process. 

Discount Loan: A discount loan is a mortgage where the buyer has paid extra cash at closing to receive a reduced interest rate by purchasing points. Your discount loan may enable you to save money on interest over the life of the loan, depending on how long you plan to stay in your home.

Escrow Accounts: The money that goes into the Escrow account comes from a portion of your monthly mortgage payment. An escrow account helps you pay these expenses because you send money through your lender or servicer, every month, instead of having to pay a big bill once or twice a year. Many lenders require that you pay your taxes and insurance using escrow, so they can make sure that the bill gets paid. Your mortgage servicer will manage the escrow account and pay these bills on your behalf. 

Homeowners insurance: A lender usually requires prepayment of the first year’s homeowners insurance premium at closing.

Lender’s Title Insurance: This is an upfront, one-time fee paid to the title company that protects a lender if an ownership dispute or lien arises that was not found in the title search.

Loan Origination Fee: A loan origination fee is an upfront fee charged by a lender to process a new loan application. The fee is compensation for executing the loan. Loan Origination fees also pay for services such as processing, underwriting, and funding.

MORTGAGE INSURANCE PREMIUM (MIP): Upfront mortgage insurance premium (MIP) is required for most of the FHA's Single Family mortgage insurance programs.

Prepaid Interest Fee: Prepaid interest charges are due at closing for any daily interest that accrues on your loan between the date you close on your mortgage loan and the period covered by your first monthly mortgage payment. 

Private Mortgage Insurance(PMI): Private mortgage insurance, also called PMI, is a type of mortgage insurance you might be required to pay for if you have a conventional loan. Like other kinds of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan.  

Property Tax: At closing, expect to pay any pro rated property taxes that are due from the date of closing to the end of the tax year.

Recording Fee: A recording fee may be charged by your local recording office, usually a city or county clerk's office, for the official processing of public land records.

Title Insurance: Owner’s title insurance provides protection to the homeowner if someone sues and says they have a claim against the home from before the homeowner purchased it. Associated fees with title insurance include title examination, title search, document preparation.

Transfer Tax: When you buy or sell a house, you must pay a transfer tax as a percentage of the sale amount. In Ohio the transfer fee is ($1 per $1,000 dollars of the value of property sold or transferred).