Understanding Closing Costs
You will be required to pay various fees to different parties during the cost of your home purchase, many of which are listed below. Some of these fees are paid up-front and some are paid at closing. Keep in mind that there may be others depending on your specific circumstances, and, likewise, some of these may not apply to your closing at all.
Potential Closing Costs include:
- Loan application fee – Charged by the lender to offset fixed costs related to mortgage loan processing.
- Loan origination fee – Typically computed at 1% of the loan amount.
- Loan points – Each point is equal to 1% of the loan amount. Points are used by the lender to adjust the yield on the mortgage when it is sold to an investor. By paying more points, the borrower may obtain a lower mortgage interest rate.
- VA funding fee – Applicable on VA loans only. The fees are due at closing, or may be added to the loan amount and financed.
- Underwriting fee – Usually included in the application fee; however, practices vary from lender to lender.
- Mortgage insurance – One year’s premium is typically due in advance at the time of closing.
- Pre-payables – The lender may require that the buyer pre-pay any of several types of recurring monthly expenses that a homeowner normally pays. These may include property taxes, home hazard insurance, and mortgage interest charges. The lender may require prepayments of such expenses to be adjusted at the time of closing.
- Closing attorney fess – In North Carolina the buyer is required to use a closing attorney to administer to the escrow process and prepare the settlement statement (HUD-1). In Chapel Hill and experienced closing attorneys services will cost about $650-$750.
- Title Insurance – Provides protection for lenders and homeowners against financial loss resulting from legal defects in the title.
- Recording fees – Charged by the State of municipal entities for entering the closing documents into the public record.