The various categories of items that are payable in connection with your mortgage loan are typically generalized into one term: Closing Costs. These costs have several different categories that are briefly explained below. We want to outline these various charges because they can add up quickly. It is important to know that all the costs paid at closing are not paid to one company, but rather many different companies that all have a vital role in the success of your transaction.
Lender fees: These are fees that are paid directly to the lender you choose. They can include underwriting fees, administrative fees, document preparation fees, origination fees (points) and/or processing fees.
Third Party fees: These are fees that may be mandatory for your loan transaction, but are not paid to the lender. These can include credit report, appraisal report and flood certification.
Title fees: These are fees that will be paid to the title company that assists in approving your title insurance policy and helping to close your loan and ensure that the lender has a valid lien against your home.
Escrows: If you choose to include taxes and insurance in your monthly payment, you will be required to pay the amounts necessary to establish the escrow accounts. An amount between 2 and 8 months worth of taxes and insurance will be collected to make sure the escrow accounts have a sufficient balance to pay these items when they become due.
Taxes and insurance: Depending on the time of year and when taxes and insurance are due, you may be asked to pay 6 months of taxes or 12 months of insurance as part of your transaction. For example, if you are slated to close a refinance transaction within 90 days of your homeowners insurance premium being due, you will be asked to go ahead and pay that premium amount at closing.