There are various fees and charges involved with obtaining a mortgage loan. These fees and charges as a whole are referred to as Closing Costs. There are two types of Closing Costs: Non-Recurring Closing Costs and Prepaid Closing Costs (also known as "Recurring Closing Costs" or "Prepaids").
Non-Recurring Closing Costs refer to those fees/charges for services related to the processing and closing of your loan, such as the appraisal fee, credit report fee, origination fee, discount points, processing fee, title insurance, closing fee, etc. Some of these costs are paid directly to the broker/lender, and some are paid to a third party vendor. The reason these are referred to as “Non-Recurring” is because they are only occur once.
Costs are payments and/or deposits for items such as property insurance
premiums, interim interest, real estate taxes, and initial deposits to the
escrow account. The reason Prepaid
Closing Costs are referred to as “Recurring Closing Costs” is because they
will continue to recur as long as you have the loan. Except for the interim
interest charge (which will be based upon the interest rate on your loan) all
Prepaid Closing Costs should
be the same in nature and amount regardless of which lender provides you the
mortgage loan - the amount of real estate taxes is set by the county; you
select the insurance company to provide the property insurance; the amount of
money that is required to be deposited into the escrow account is governed by
There are some Closing Costs
that will be the same amount
regardless of the lender (i.e. recording fees, release fee, state documentary
tax). There are some Closing
Costs that could vary moderately
in amount depending upon the lender (i.e. appraisal fee, credit report fee,
title insurance, flood certification, etc). And there are Closing
Costs that will vary greatly
in their amount depending upon the lender (i.e. origination fee, discount
points, underwriting fee, etc.).
Listed below are typical Closing Costs and an estimate of the amount for the specific charge.
Almost all mortgage loans require an appraisal report of some type. Most lenders utilize independent licensed appraisers to provide the appraisal report, although some lenders have employees who prepare the appraisal report. The cost of the appraisal report varies depending upon the appraiser selected, the type of appraisal that is needed, the size of the property, and location of the property. The lender typically collects the appraisal fee “up-front” (at the time of loan application) and then pays the appraiser directly.
Credit report fee: $20-$55
Almost all mortgage loans require a credit report on the borrower(s). Credit reports are provided to lenders by credit reporting agencies. The cost of the credit report varies depending upon the agency selected and type of report that the lender requires. The lender typically collects the credit report fee “up-front” (at the time of loan application) and then and pays the credit-reporting agency directly.
Loan origination fee: 0% - 5%
Fee paid to the lender for originating the loan, expressed as a percentage of the loan amount (i.e. a 1% origination fee on a $100,000 loan is $1,000). The amount of the origination fee will vary depending upon the lender, the type of loan, and the size of the loan.
Discount Points: 0%
Discount points are paid to reduce the interest rate of the loan, and are usually expressed as a percentage of the loan amount.
Lender fees: $150 -
Lender fees come in various names and amounts, and include such items as an underwriting fee, processing fee, document preparation fee, and administrative fee. These fees are paid directly the lender.
Document preparation fee: $100 - $200
A fee to cover the cost of preparing the closing documents. Most lenders utilize a 3rd party vendor to prepare the closing documents, although some lenders prepare the closing documents themselves. The amount of this fee will vary depending upon the lender or 3rd party vendor that prepares the closing documents.
Flood certification fee: $15 - $25
A service to determine whether the property is located in a Flood Hazard Area. This fee is paid to a company that performs this determination, and the amount of this fee will vary depending upon the company that is selected to provide this service.
Tax service fee: $75 - $95
A service utilized after loan closing to provide the lender that services the loan the amount of the property taxes. This service also monitors whether any unauthorized transfers have occurred or any liens have been placed against the property. The amount of this fee will vary depending upon the company that is selected to provide this service.
Title Insurance (owner's policy): $0
There are 2 types of title insurance: An "owner's policy" and a "lender's policy".
The owner’s policy protects the interests of the borrower/buyer, and remains in effect for as long as the buyer owns the property. Thus, owner's title insurance is not applicable for a refinance transaction or for 2nd mortgages. In most cases, the cost of the owner's policy is typically paid by the property seller.
Title Insurance (lender's policy): Varies
The lender’s policy protects the interests of the lender, and the policy terminates when the loan is paid off. In most cases, the lender's policy is paid by the borrower. A lender's policy is typically not required for 2nd mortgages. The primary factor that determines the cost of the lender's policy is the purpose to the loan (i.e. purchase or refinance) and amount of the loan.
When the purpose of the loan is to purchase property, the typical cost for the lender's policy is $120 - $150, regardless of the amount of the loan.
When the purpose of the loan is a refinance, the cost for the lender's policy will vary depending upon the loan amount and title company selected. For example, the cost for the lender's policy for a $100,000 loan would be approximately $740, and the cost for title insurance for a $300,000 would be approximately $1,110. Although most title companies charge the same for title insurance there are slight differences in the cost of title insurance depending upon the title company. For refinance loans, the cost of the title insurance is typically reduced if the loan being paid off is less than five years old.
Title Endorsements: Varies
For most mortgage loans, additional endorsements to the title insurance policy are necessary to provide additional title protection to the lender. The necessity of these additional endorsements will vary depending upon the lender, type of loan, amount of loan, and type of property. The cost of these endorsements will vary depending upon the endorsements that are required by the lender and the title company selected.
Title Search: $105 - $110
For 2nd mortgages, instead of title insurance, a title search is obtained. The title search reflects the owners of the property, liens against the property, and property tax status. Although most title companies charge the same for a title search, there are slight differences in the cost depending upon the title company selected.
Loan Closing Fee: $100 - $200
Fee paid for closing the loan. Since title companies typically close the loan, the fee is usually paid to a title company, although some lenders may close the loan and charge a fee for this service. When a title company is utilized to close the loan, the amount of the closing fee will vary depending upon the title company selected.
Real Estate Closing Fee: $75 - $100
Fee paid for the real estate closing and applicable only when the loan is utilized to purchase property. Since title companies typically conduct the real estate closing, the fee is usually paid to a title company, although some lenders may conduct the real estate closing and charge a fee for this service. Typically this fee is split 50-50 between the buyer and the seller. When a title company is utilized to perform the closing, the amount of the closing fee will vary depending upon the title company selected.
Improvement Location Certificate (ILC): $100 - $200
The cost for an ILC on the property, and paid to a
licensed property surveyor. An ILC may or not be required depending upon
whether or not the title company selected determines that it is necessary in
order to provide clear title insurance to the lender.
Recording Fees: $50 - $150
Fees paid to the county for recording the deed of trust and
the warranty deed (in the case of a loan to purchase property).
County recording fees are the same throughout the state of Colorado and
depend upon the number of pages in the document being recorded. The number of
pages in a deed of trust can vary depending upon the number of riders to
the deed of trust. The
warranty deed is usually a one-page document.
Tax Certificate: $20 - $25
Fee paid to a title company to determine the status of
property taxes on the property. The amount of the tax certificate will vary
depending upon the title company selected.
Release Fee: $25 per release
If the loan is paying off an existing loan (i.e.
refinancing a current mortgage), this fee is paid to the county for releasing
the existing mortgage loan.
Fee paid to the state of Colorado and applicable only on loans to purchase real estate. The amount of the fee is .10 per $1,000 in sales price (i.e. on a $100,000 purchase price, the fee will be $10).
The first payment date on most mortgage
loans is the 1st day of the first full month following the month in
which closing occurs. Since interest on a mortgage loan is typically paid in
arrears, there is an interest charge at loan closing on the remaining days of
the month. For example, if the loan closes in August, the 1st payment
will be October 1st, and the October 1st payment pays for
interest for the month of September, and interest for the month of August is
pro-rated based on when the loan is disbursed during the month of August.
Hazard/Property Insurance – Initial Premium and Reserves
Lenders will require that property be
protected with hazard insurance that is in full force as of the date of loan
closing. Thus, the annual premium for the insurance must be paid at closing. In
addition, for most 1st mortgage loans, most lenders will require that
an amount equal to 1/6th of the annual premium be collected at
closing and placed in the escrow account.
Flood Insurance– Initial Premium and Reserves
If the property is in a flood zone, lenders
will require that property be protected with flood insurance that is in full
force as of the date of loan closing. Thus, the annual premium for the insurance
must be paid at closing. In addition, for most 1st mortgage loans,
most lenders will require that an amount equal to 1/6th of the annual
premium be collected at closing and placed in the escrow account.
Taxes - Reserves
For most 1st mortgage loans, most lenders require that an escrow account be established to pay the real estate taxes levied against the subject property. In general, the lender collects the borrower’s portion of taxes for the current year plus an amount equal to 1/6th of the annual taxes.
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