- Attorney's or escrow fees (yours and your lender's, if applicable)
- Property taxes (to cover tax period to date)
- Interest (paid from date of closing to 30 days before first monthly payment)
- Loan origination fee (covers lender's administrative costs)
- Recording and survey fees
- First premium of mortgage insurance (if applicable)
- Title insurance (yours and your lender's)
- First payment to escrow account for future real estate taxes and insurance
- Paid receipt for homeowner's insurance
- Any documentation preparation fees
- The sales agreement states who will pay which costs
Mortgage Loans -- What are Closing Costs?
Mortgage loan closing costs [or settlement costs] are the miscellaneous expenses involved in the transfer of real estate from one owner to another. They are paid when the home buyer and the seller meet to exchange the necessary papers for the house to be legally transferred. On the average, mortgage loan closing costs run approximately 2% to 3% of the house price. This percentage may vary, depending on where you live, and are usually comprised of the following:
Buying a Home: What happens on closing day?
On closing day, the certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale. You'll present your paid homeowner's insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.
Once you're sure you understand all the documentation, you'll sign the mortgage, agreeing that if you don't make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You'll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.
You'll pay the lender's agent all closing costs and, in turn, he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.
Lenders are required to give you a Good Faith Estimate of Settlement Charges (GFE) within three days of your mortgage loan application; however, they don't always do this because they rarely get caught or punished. Sometimes, the GFEs given to borrowers are purposely inaccurate or deceitful.
To make sure they don't try and cheat you, ask the lender for an estimated closing statement right after you agree to buy a home. Ask the lender to see a copy of several closing statements on other loans that were just closed. Of course, they won't want to do this, but insist that they can show you such statements provided they hide the other parties' personal information. Compare these statements with your GFE. All costs should be about the same except for the loan origination fee and any discount points.