All closing costs are spelled out in the lender’s Good Faith Estimate, which is required by Federal law. If you want to make sure you are paying the least amount possible in closing cost fees, it is wise to compare costs from different lenders. The Good Faith Estimate is just that - an estimate. The actual changes may differ. RESPA allows the borrower to request to see the HUD-1 Settlement Statement that shows all actual charges imposed on borrower in connection with the settlement one day before the closing. If you see a charge that doesn’t make sense, or that no other lender has, it’s time to ask questions.
Below is a list of fees you may expect lenders to charge you (although different lenders may use different names):
In the state of Maine these costs are typically paid by the buyer.
Loan Application Fee - (or Origination Points) is charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan. Origination fees are often expressed as a percentage. A one percent loan origination fee is equal to 1% of the loan amount. Some lenders add origination points into their quoted points while other lenders add an origination point in addition to their quoted points.
Application Fee- covers the lender’s cost to process the information on your loan. Usually, you must pay this charge at the time you file the application. Some lenders may apply the cost of the application fee to certain closing costs. Generally lenders do not refund this application fee if you are not approved for the loan or if you decide not to take it.
Credit Report - Three major national credit bureaus (Equifax, TransUnion and Experian) supply lenders with the information on your credit behavior. Consumers typically pay $45 to $55 for this report. You only pay once, however, usually between $40 and $60.
Processing Fee - here the lender is charging you for the cost of processing the loan. It´s usually between $75 and $125.
Document Preparation Fee - The cost of preparing loan documents for the closing. Between $0-$200. This is a very negotiable item.
Appraisal Fee - This fee ($150 to $400 depending on the price of the home) pays for an independent appraisal of the home you want to purchase. The lender requires this estimate of the market value of the house for the loan. Factors to be considered in determining market value are: present cash value; use; location; replacement value of improvements; condition; income from property; net proceeds if the property is sold, etc. The appraisal is a critical factor in determining how much of a mortgage the bank or mortgage company will approve. After the appraisal is completed, the borrower is normally entitled to a copy of the appraisal from the lender.
Title Search & Insurance -A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.
A title search can show a number of title defects among these are unpaid taxes, unsatisfied mortgages and judgments against the seller. But there are some hidden defects that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his marital status, resulting in a possible claim by his legal spouse. Other problems include things like fraud, forgery, defective deeds, mental incompetence, confusion due to similar or identical names, and clerical errors in the records. These defects can arise after you have purchased your home and jeopardize your right to ownership.
Survey Fee - The title insurance company or lender may require a survey of the property. This is to verify official boundaries of the property and that your lot has not been encroached upon by any structures. Depending on the size of the property and what state you live in, this cost ranges from $225 to $350.
Flood Certification - Some homes require flood certification fees, amounting up to $30. It verifies that the property is not in a flood zone. If the property is located within a defined zone the lender will require a flood insurance policy.
Recording and Transfer Charges - A small fee (to $50 to $150) to cover the cost of the paperwork required to record your home purchase.
Documentary Stamp Tax (Transfer Taxes) - Are collected by the state of Maine and are paid equally by the buyer and the seller. The amount is calcualted as $2.20 per $1,000 of the sales price.
Interim interest - Accrued interest from closing date until the end of the month.
Pre-paid interest on the loan - The per-day interest charge on the loan from the day of the closing until the last day of the month in which you close. This is paid at closing due to timing and last minute calculations. After that, you skip a month and begin paying a regular monthly balance because the loan is paid in arrears. The cost depends on the size of the loan and the interest rate.