Understanding Mortgage Closing Cost Items
If you’re getting a mortgage, you’re probably hearing talk of closing costs. But what makes these up, and why do you have to pay them? Closing costs are commonly lender fees, appraisal fees, title company fees, and more. Learning what fees you’ll be expected to pay and why can help make the process of getting a mortgage and buying a home less stressful and confusing. Here are some of the commonly seen closing costs you might have as a part of your mortgage and real estate transaction.
- Lender Fees – These are generated by your lender, as the cost of creating and funding your mortgage. People who buy houses for cash won’t need to pay these fees, but most people have a mortgage on their home. You can shop around for different lenders if you want your closing costs to be a little bit lower, but you shouldn’t base your choice of a mortgage lender solely on the fees.
- Title Company Fees – When you close your real estate transaction and your mortgage is funded by the lender, a title company will be involved. They will help you sign everything, and they will also do a search to make sure the title to the property you’re buying is clear. That’s not a free service, so you can expect to see some fees for the title company on your HUD-1, which gives all the closing information. The title company also charges to record the deed and the mortgage with the county, and prepare all the paperwork to transfer the deed from the seller’s name to yours.
- Appraisal Fees – An important mortgage closing cost is the appraisal fee. An appraisal is required by your lender, to make sure the house is worth the amount you want to borrow. Expect to see that fee on your closing statement, and to pay it at closing.
- Pest Inspections – Termites and other pests can really cause damage to a house. You may have to pay for a pest inspection, to make sure the home doesn’t have any wood-destroying organisms in it before your lender will fund your loan.
- Septic and Well Certifications – If the house you’re buying has a septic tank and/or a well for drinking water, both of those will have to be inspected and certified before you can close your real estate transaction. You will probably be asked to pay for those, although the seller might agree to do so.
- Condo Questionnaire Fees – If you’re buying a condo, another mortgage closing cost may be the questionnaire fees. Condos have specific ways they do things, and they may require more from you than a typical home purchase would. If you expect these fees and are ready for them, you can avoid any unpleasant surprises at closing.