Here is a guide to understanding the types of fees you will see on your closing paperwork. Many of these fees are misunderstood by first time home buyers and it is important to be educated. Some fees are company specific and the amounts often vary by location, many of them will still be on your final paperwork. Below is a list of potential fees you may see when you are preparing to close on your new home.
Loan Origination Fee: This fee comes from processing your loan and is usually 1% or less of the total loan amount
Discount Points: The amount of this depends on what rate was initially given to you and what rate you want to apply for.
Processing Fee: This fee comes from submitting and processing your loan application. Each lender has a different charge for this type of procedure.
Appraisal Fee: This fee comes from having the home you purchase appraised to ensure the home is valued at the loan amount.
Underwriting & Documentation Prep Fee: These are the final steps in your loan processing that finalize the loan and provide the borrower with a clear to close on their home. This final step verifies all documentation is processed correctly and ready to move forward.
Recording Fee: This fee is for recording the deed and mortgage at the local court house.
Notary Fee: Documents such as the deed of trust must be notarized by a registered notary before it can be recorded at the court house. This fee depends on the location for the sale of the home, each county determines the cost.
Title Insurance: This is protection for you as a buyer to make sure that the title is clean and that no contentions will be made against you as the new owner of the house. In the event there is a error found, the title insurance helps to protect you.
Personal Mortgage Insurance (PMI): This type of insurance is added to the total of your monthly payment. PMI is required to help ensure the lender is protected in the event the borrower defaults on their loan for any reason. If you make a down payment of less than 20% you will have PMI added to your monthly payment. However, when you reach more than 20% equity in the home, then you no longer need to pay PMI
Home Owner's Insurance: This type of insurance protects the home in the event damage were to happen. Lenders require home owner's insurance to be placed on the property before they will allow the loan to finalize.
Flood Insurance: This type of insurace is only required when the home being purchased is in a registered flood zone.
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