Abstract or Title Search

The lender requires the title company to run a detailed title search for the property to make sure that the seller can give a clear title of the property. Some of the problems that this title search may uncover are: unpaid mortgages, any tax liens or judgments, any easements, etc.



Application Fee

This is generally the lender's administrative cost associated with processing the application for a mortgage loan.



Appraisal Fee

The lender appoints either an independent appraiser or a member of the lender's staff to appraise the value of the property. Before the closing date, the lender's appraiser generally visits the property, inspects the house, the neighborhood and considers sale prices of comparable houses in the neighborhood and/or in the town. Based upon this factual data the appraiser estimates an appraised value of the property. Appraisals are generally ordered during the early stages of the loan process.



Bank Attorney's Fee

These are the fees paid to the attorney hired by the lender for preparing your mortgage papers and for being present at closing. Note that this is separate from the fees paid to the attorney hired by the buyer.



Credit Report

Lenders typically proccur a borrower's credit report because before they offer you the mortgage, they need to know how you as a loan borrower have done with some of your previous credits. This information is used in conjunction with your other documents for loan procurement. The lenders may ask for a (written) explanation if they are not comfortable with some of the data in the report.



Documentation Preparation

This is the cost associated with preparation of loan documents such as the mortgage, deed, etc.



Origination Fee (points)

A point is 1.00% of the loan amount. So, if the loan amount is $100,000 and terms of the loan are with 2 points, then at closing, the origination fee is 1.00% x $100,000 x 2 points = $2,000



Private Mortgage Insurance (PMI)

The lender may require the borrower/buyer to get Private Mortgage Insurance (PMI) in order to protect part of the mortgage in the event the borrower defaults. Generally, if you cannot afford a minimum amount of down payment (typically 20%), the lender may require you to buy PMI. Since, PMI only insures the loan amount over 80%, the PMI payments should not continue after the loan to value ratio drops below 80%, but this is something you need to check with your lender and make appropriate arrangements for, so that, the additional payments do not continue for the life of the loan.



Recording/Transfer Fee

These are the fees paid to the state and local governments to cover charges related to the administrative task of recording the deed related documents in your name.



Survey or Plot Plan

This is the survey conducted by the lender/title company to get data about the location of the property, dimensions of the lot, the lot lines, easements and rights of way. It might be a good idea to have the old survey modified rather than having a new one drawn.



Tax Service Fee

Some lenders take a one time service fee for handling your real estate taxes, mortgage insurance, hazard insurance, and flood insurance.



Title Examination

This is the fee associated with examination of the title for any problems, some of which are mentioned above.



Title Insurance (Lender's coverage)

This fee protects the lender against loss due to any problems or defects in the property title. Even though the lender performs a title search and examination, the insurance protects the lender in case problems with the title are detected later. The insurance taken is usually for the amount of the mortgage loan.

Interest paid in advance

This is the amount of interest on the loan, for the number of days between closing and the period covered by the first mortgage payment. For instance, say your mortgage amount is $100,000, is paid for monthly and the interest for the first month is $900 which translates to $30/day ($900/30days). Now say you are closing on the 23rd of the month and there are 7 more days before the begining of next month. So, your pre-paid interest would be 7 days x $30/day = $210.



Other charges

There might be some other charges in addition to those included in this list.



Owner's title insurance coverage

This is the insurance taken to protect the buyer against problems or defects in the property title. This is a one time premium, typically paid by the seller on a purchase and by the buyer on a refinance. Usually the cheapest rate might be offered by the company that did the title search. Sometimes sellers have already purchased an owner's policy which is then handed over to the buyer. In addition to this, the lender may charge a nominal one time fee.



Property/Home Insurance

Usually referred to as hazard insurance. This insurance protects the buyer (and the lender) against loss of or damage to the property. Check with your lender for the type of coverage they require. Generally home owners take insurance against theft, fire and other natural hazards for their own protection. There are many different options available such as insuring personal valuables such as antiques, jewelry, collectibles etc.



Real Estate Taxes

The lenders typically require that the borrower escrow anywhere from 2 to 12 months of property taxes with the lender. They may also require regular monthly payments towards these taxes. By escrowing these taxes, the lender can make the payments as and when they become due.

NOTE: The intent of this list is to informally deliver a breakdown of some of the closing costs. It is not a complete list of closing costs. Each lender has a different set of closing costs that they charge.