Settlement costs

There are so many different charges involved in buying a home, it is important to know what to expect at the settlement. Your lender is required to give you a Good Faith Estimate (GFE) of your settlement costs within three business days of your loan application. Once you get it, review the charges below to avoid any surprises when you sit down to close on your loan.

There are two basic categories of settlement costs:

* Please remember that all lenders / brokers call the varying costs and expenses associated with "Closing" your mortgage different names; "Closing Costs", Settlement Costs", Settlement Expenses", etc. In fact, to appear to have a sharper pencil with regard to your specific mortgages "Closing Costs -Expenses", some will purposely not include all their charges in their Good Faith Estimate to you! This questionable practice leads to huge surprises when you get to the closing! At Tri-State Mortgage Consultants, I identify and disclose every possible expense / cost / fee / charge that you will see at your closing. Full disclosure is the rule! The lesson to be avoided...anytime you see exceptionally low closing costs or expenses, it is because it is too good to be true!

• Fees to get a mortgage. This includes lender fees and points, as well as a host of other charges involved in obtaining and processing your loan. Points are an upfront charge expressed as a percent of the loan amount (e.g., 1 point is 1 percent of the loan) to increase the lender's effective yield on a loan.

Specific lender fees can include:

• Loan Origination Fee. This is a charge for your lender's work in evaluating and preparing your mortgage loan.
• Application Fee – This charge covers the initial costs of processing your loan application and obtaining your credit report.
• Appraisal Fee – Your lender will need an opinion from an independent appraiser of the market value of the home you wish to purchase.
• Survey – This fee goes to a surveying firm who will verify that your lot has not been encroached upon by any structures since the last survey conducted on the property and to ensure that the home and other structures and legally where the seller says they are.
• Mortgage Insurance – A lender may require this type of insurance for buyers who make a down payment of less than 20 percent of the value of the house. The policy covers the lender's risk in the event the buyer fails to make the loan payments. Premiums are typically paid annually from an escrow or reserve account, or in a lump sum at closing.
• Homeowner's Insurance – Insurance that protects property against loss caused by fire, some natural causes, vandalism, etc., depending on the terms of the policy. Also includes coverage such as personal liability and theft away from home. Your lender will expect you to have a policy in effect by closing.
• Fees to establish and transfer ownership of the property. Your lending institution is not likely to give you a loan on a house unless you can prove that the seller owns the property you want to buy. This is where title search and title insurance fees come into play. A title agent will verify that the seller is, indeed, the owner of the property and issue a title insurance policy to guard the lender against any errors that could have occurred in the searching process. The cost of the policy is usually based on the loan amount. There may also be attorney, escrow, courier fees and other charges involved in the settlement process.
• Fees to state and local governments. These fees include transfer, recordation and property taxes collected by local and state governments. Your taxes based on the assessed value of the home, which you pay for community services such as schools, public works, and other costs of local government. Taxes can often be paid as a part of your monthly mortgage payment.