Closing Costs and Pre-Paid Items

There are certain standard costs associated with closing the sale of a house. These fees are split between the buyer and the seller, as spelled out in the sales contract.

As your real estate agent negotiates the sales contract for you, we will help to limit the number of closing costs for which you will be responsible.

We will walk you and your agent through the closing costs, answering any questions you may have explaining which costs are decreed by law to be yours and which are negotiable.

Good Faith Estimate

Buyers will receive a "Good Faith Estimate" of closing costs and pre-paid items at the time the loan application is submitted to Express Mortgage, LLC. The estimate is based on past experience and should include all closing costs. We will be glad to answer questions regarding costs and estimates.

Closing Costs

Closing cost are fees charged directly by companies and the govermnent to help the buyer purchase a property.  Below, we have broken these fees apart and explained each fee and why it's charged.

Lender-Related Closing Costs

Loan Origination Fee (Referred to as "Points")
An option for the home buyer is to pay points to lower the interest rate at which the loan will be repaid. Each point equals 1 percent of the mortgage amount. For example: on a $150,000 loan, 1 point would equal $1,500.  Typically, 1 point reduces the rate by 0.250%.

Appraisal Fee
The fee for having the house appraised may be incorporated into the closing costs or payment may be required at the time the loan application is submitted.

Credit Report
Express Mortgage, LLC uses a credit report to determine the creditworthiness of the loan applicant.

Processing Fee
The processing fee cover the cost of handling your file.  This includes packaging your loan to submit to underwriting, verifying employment, income, assets and any other items that require third-party verification, cordinating with the appraiser, title company, insurance company, real estate agents, builders, surveyors, termite companies, government agencies and you

Underwriting Fee
This fee pays the lender for the underwriting of your loan file.  The underwriter ensures your documentation matches with the application and you meet the minimum guidelines set in place for the particular loan program applied for.

Tax Service Fee
Your servicer may charge a one-time fee to verify your real estate taxes and homeowner's insurance is paid each year for the life of the loan.  Sometimes this is contracted out to a third party.

Flood Certification Fee
Your property is researched against a 100-year flood plain map.  If your property is found to lie in a flood plain, you will be required to carry flood insurance.  This is often accomplished by a third-party as well.

Title-Related Closing Costs

Closing Fee
The title company actually performs the closing on the purchase or refinance.  It is also responsible for handling all monies involved in the transaction.  The closing fee covers this.

Document Preparation Fee
The title company takes all the documents from the lender prepares them according to the closing instructions.  The title company also gathers documentation from the termite company, real estate agents, sellers and buyers and any other party involved in the transaction.

Title Search
The property is researched to verify all liens against the property.  The buyer is also researched for any judgments or liens that may affect title.

Title Insurance Policy
A policy is issued to the borrower after closing that protects against any claims against the property that may arrise.  This is paid once at closing and is good for as long as the property is owned by the buyer.

Government-Related Closing Costs

Tax Stamps
Some states charge tax stamps on a purchase.  This is similar to a tax on the sale of the property.  In some states, this is split with the seller.

Recording Fee
The Mortgage on the property is filed with the local government and is a public record.  The government usually charges by the page.

Funding Fee/ Guarantee Fee
Government-backed loans, such as VA, RD and FHA loans, charge a Funding Fee or Guarantee Fee.  This can range from .5% to 3.3% of the loan amount depending on the program.  Since the government backs the loan, there is little to no mortgage insurance required in the payment.

Other Closing Costs

Termite Policy
Some states have termite problems.  In these states, lenders may require the house have an inspection prior to the closeing and have a termite insurance policy put in place at closing.

Survey
Many statesrequire a new survey every time the property changes ownership.

Courier Fee
Any of the above parties may incur courier/delivery fees that are passed on to the buyer.

Pre-Paid Items

Pre-paid items are not fees charged by a particular entity to help the borrower purchase or refinance a property.  These items include interest, taxes and house insurance.

Interest Payment
Typically the buyer is required to pay interest on the mortgage loan to cover the time between the closing date and when the first mortgage payment period begins. For example: If closing is on May 15. Your first monthly payment begins to accrue interest on June 1 with your first mortgage payment due July 1. At closing an interest payment covering the accrual period between May 15 and May 31 may be required.

Escrow Account
At closing a payment may be required to fund the escrow account if the lender is paying home insurance, property taxes and/or other expenses out of the escrow account.

Settlement charges encompasses the sum of the closing costs and pre-paid items.  Above is the vast majority of the items a borrower will see on the HUD-1 Settlement Statement at the closing table.

Give us a call today at 479-254-9403 or 866-530-4569 to discuss your options and receive a Good Faith Estimate with one of our highly educated loan officers.