Within three days of your loan application, your lender is required to furnish you with a copy of Settlement Costs, a booklet prepared by the Department of Housing and Urban Development. It describes the settlement process and the typical costs that buyers and sellers often must pay at settlement. You may even want to ask for a copy before applying because the information is valuable.
You’ll also receive a Good Faith Estimate of settlement charges, based on your lender’s past experience in the area where the property is located. These charges may include:
Loan origination fees are a percentage of the loan that cover the lender’s administrative costs. The loan discount, called points (with each point being 1 percent of the loan), is extra interest paid to the lender to make up the difference between market interest and the interest of the loan.
Other charges at closing may include the costs of a survey, appraisal or inspection, as well as the lender’s services in obtaining mortgage insurance for you. If you assume a mortgage, you’ll pay an assumption or transfer fee.
Charges for fees include title/abstract searches and recording and transfer charges.
Mortgage interest, the first year’s hazard insurance, and first year’s mortgage insurance (if required) are paid to the lender in advance.
Reserved deposits used by the lender to pay for hazard insurance, property taxes and possibly mortgage insurance are paid at this time.
Commissions and other fees include a variety of services, such as document preparation, notary services, handling the schedule, warranties and others.