The Loan Process...

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Step Four:

Anticipate total costs

At the start of the home buying process and particularly at closing (the meeting where you'll sign the paperwork and pay all the expenses to take ownership of your new home), you'll find yourself paying various fees and other charges.

Some of these costs are negotiable with the seller. Your real estate agent can help you negotiate these in the sales contract.

This section discusses the costs you most likely will be responsible for so you can have the funds ready.

Lender-related Costs
The cost of a loan is more than rates and points. Prior to selecting a lender for a specific loan, you should ask what other fees there will be in addition to the points. Within 3 days of application, you should be mailed what's called a Good Faith Estimate of what the loan will cost. And this is just what the name says, it's an estimate. And, in "good faith", it's as accurate as possible given the information available at the start of the loan process.

You should receive an initial Truth-in-Lending disclosure which includes the APR and other financial terms within 3 days of application. A HUD-1 Settlement Statement will be issued to you prior to closing that provides you with the full disclosure of closing costs. It establishes the total funds you must bring to the closing meeting and itemizes how and to whom the funds are to be disbursed. Typical lender-related costs include:

  • Loan Origination Fee
  • Loan Discount Points
  • Application/Processing/Underwriting Fee
  • Document Preparation Fee

Third Party Fees
Third-party fees are collected by your lender for services provided by outside parties, such as an appraiser. All lenders typically require some of these fees. Many of the services are regulated by various governmental organizations.

  • Appraisal Fee
  • Credit Report Fee
  • Mortgage Insurance
  • Tax Service
  • Flood Check Fee
  • Closing/Escrow/Attorney Fee
  • Abstract or Title Search
  • Title Insurance
  • Homeowner/Hazard Insurance
  • City/County/State Tax/Stamp
  • Recording Fees and Transfer Taxes
  • Notary Fee
  • Survey Fee
  • Inspection Fees

Pre-paid Costs
When you purchase a home, there will be some necessary charges to cover things like the interest on your loan until your first payment is due. These are called "pre-paids" and include the following items.

  • Pre-paid Interest
  • Escrow Accounts
  • Property Taxes
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