Understand Mortgage Fees That Apply To Your Loan

When purchasing a home, everyone talks about a down payment but rarely goes over closing costs.

In this article, we break down typical closing costs and what is expected of buyers to pay when they make it to the closing table. This will hopefully give a little more clarity as to what is being requested from you. Understanding what you’re paying for, makes the process less stressful so you’re not surprised by these random, complicated fees. 

LENDER FEES

Underwriting Fee:

This fee is charged directly by the lender for verifying and underwriting your loan paperwork to make sure you qualify. On average, underwriting fees shouldn’t exceed $1,000 depending on the lender 

Credit or Charge for Interest Rate:

This is the credit or charge you receive for the interest rate. Depending on the rate you lock in, you may receive credit from the lender or a charge also known as a buy-down. Typically, you will only have a charge for the interest rate if you plan on locking in a rate that falls below the par rate, or the market rate for your specific scenario. Otherwise, you may receive a credit for a rate that you lock in that exceeds the par rate you’re qualified for.  

THIRD-PARTY FEES

Tax Service Fee:

The service cost is paid at closing and collected by the lender to ensure the buyer pays their property taxes on time. 

Flood Certificate Fee: 

A charge from the flood certification company that provides life-loan loan certification of the flood zone status of the property. Typically around $18. 

Processing Fee: 

A charge from the lender for setting up the application and gathering all documentation pertinent and necessary to set up the loan to be moved to Underwriting. Typically, this fee will not exceed $1300.

Tax Monitoring and Tax Status Research Fees:

These fees cover the cost of hiring a company to confirm the calculated property taxes are correct and notify your lender if you miss any payments on your property taxes. This fee will vary based on your lender and location. 

Credit Report Fee:

This is the cost for the lender to obtain a copy of your credit report which is used for determining the loan type and interest rate you qualify for. Typically, your lender will charge no more than $15-30 for a credit report. 

Appraisal Fee:

This is the cost the lender charges in order to hire an appraiser to estimate your home’s market value. This benefits both the buyer and seller to make sure the home is being bought and sold for what it’s worth. The cost of the appraisal will vary between lenders and on the square footage of the home. 

Services You Can Shop For

Lender’s Title insurance: 

This charge can be covered by the buyer or seller depending on where you’re purchasing. Typically, in Florida, buyers will pay for the lender’s title insurance. It is used to protect the lender against a defective title that can cause economic losses since it’s up to the buyer to choose the title company. This fee will vary based on the title company you choose. 

Title Search Fee: 

A fee that the title company charges in order to ensure there are existing claims on the home being sold such as liens, bankruptcies, or unpaid back taxes which means the seller does not own the home they’re selling. Depending on the state, a real estate attorney may need to handle title searches. The typical cost is between $200-$400.

‍Survey Fee:

This fee goes to the survey company that verifies and confirms the property lines on the home you’re closing on. This fee will depend on the size of the property or the abnormality of the property lines. You can expect to pay anywhere between $400-$900. 

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Taxes and Government Fees

Recording Fees: 

This fee is paid to your city or county government to update public land ownership records. This cost will vary depending on your city or county but expect to pay $125-$250 

Transfer Taxes: 

Your local government will update your home’s title and transfer ownership from the seller to the buyer. This fee depends on where you live. 

Intangible Tax:

Nonrecurring tax on intangible personal property levied on obligations for payment of money which are secured by a mortgage or other liens upon real property located in the state of Florida. This fee will depend on your area.

State Tax / Stamps: This is an excise tax imposed on documents executed, delivered, or recorded in Florida and the fee will vary depending on your lender. 

Prepaids and Initial Escrow Payment at Closing

Prepaid interest: 

A charge from your lender is based on the amount of interest that accrues on your loan from the day of closing to your first mortgage payment. 

Prepaid Hazard Insurance Premium:

This is also known as prepaid homeowner's insurance premium where a full year of your homeowner’s insurance is collected and prepaid to the insurance company at closing. 

Initial Escrow Payment: 

Typically, your lender will require an additional cushion of homeowner’s insurance and property taxes to be paid upfront and held in an escrow account for the lender to have reserves and pay the taxes and insurance when they're due. 

Down Payment: 

This is the payment you make upfront when purchasing your home. It can range from 3%-25% depending on the loan type, property, and other determining factors such as your debt-to-income ratio and credit score. 

Cash to close: 

This is the final number that you are required to bring out of pocket when closing on your home. The cash-to-close consists of your down payment + closing costs to bring the total you need to close.