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REFINANCING CLOSING COSTS
Homeowners have the option of 'rolling in' their closing costs into their new mortgage, or they can choose to pay the costs with cash as the closing. There is also the option of a no cost mortgage. This type of loan allows borrowers to avoid having to pay any closing fees by utilizing a mortgage with a higher interest rate. The higher rate allows the loan originator to cover all non-recurring closing costs on the mortgage, (except taxes, interest and insurance) using the rebate received from the lender financing the mortgage.

Below is a breakdown of all closing cost fees.

 

Title & Escrow
Title insurance safeguards the buyer and lender by assuring a clear chain of title. Specifically that the individual with legal right to claim title to your property are the ones who have actually done so. It is also common for some title insurance policies to protect against forgery and fraud.

Additional title fees include:
Notary fee - the fee to notarize your mortgage documents
Recording fee - the fee required to record your deed of trust with the county recorder's office
Miscellaneous drawing, courier and express mail fees

Title companies impose fees for acting as an independent third party in making your transaction possible and making sure that all parties involved operate as agreed. This is called the escrow fee.

When refinancing, a good idea would be to contact the company that issued your original title insurance policy. They will likely offer you significant reductions for both the escrow fees and your title policy.

Lender Fees
Lenders charge a variety of different fees for financing and processing your mortgage. These fees are typically lumped into one category called 'garbage fees' and include processing, underwriting,  document preparation, administrative, and funding fees. In addition, lenders charges include tax service fees, wire and flood certification fees totaling around $650 - 850.

Points
There are two types of points: discount fees and origination fees. A point is equivalent to 1% of the mortgage amount (i.e. one point on a $300,000 mortgage is $3,000). Both types of points are detailed below.

Discount fees - Prepaid interest paid in advance by a borrower with the intent of buying down the interest rate for their mortgage.

Origination fee - Not only is this fee used to buy the interest rate down, its used to pay off the mortgage originator in the transaction, rather than accepting a higher interest rate where the lender funding your mortgage compensates the mortgage originator.

Appraisal Fees
The amount an appraiser charges for inspecting your property will depend on the type of property involved (i.e. single family vs. duplex to fourplex) and whether the property will be is utilized as an investment property or will be owner occupied. Typical appraisal fees will range from $300-$400. It is important to note that for investment properties, will require a rental survey and operating income statement to be completed, adding on an additional $200-300 onto the cost of appraisal. If you are purchasing new construction, it is likely that the is going to have to return upon the completion of the work. This is referred to as a 442 and costs an additional $75 - 100.

**You can fight your home appraisals if you feel that the value placed on your is incorrect.

Credit Fees
Typical cost for having your credit checked is around $25-$65 per person or per married couple. If your credit report lists inaccuracies, you will need to take initiative to remove these credit report errors, which may entail writing a dispute letter to the reporting bureau.

**Learn more about your credit and mortgages.

Insurance Fees
When your new mortgage closes, your hazard or homeowners insurance policies must be current. The mandated requirement for standard coverage is called replacement cost coverage. It is required that your current policy be effective for no less than four months after the first date of payment on your new loan. For example, if your current policy expires within three months of the first payment date on the new mortgage, the lender may ask you to pay one more month's premiums. You should also look to find out if your insurance carrier accepts incremental or annual payments, otherwise you may have to pay up for another year.

 

If your home is located in a geological hazard zone (i.e. flood, or quake zones) your loan provider will require that policies covering these hazards are also in place. Your carrier can determine whether your property is located in a hazard zone by referring to the most current FEMA geological hazard map.

Your carrier should be able to provide you with a quote for hazard insurance as well as for quake coverage. The National Flood Insurance Program can you provide you with a flood insurance quote. You may also be required to purchase private mortgage insurance if you are financing more than 80% of the appraised value of the home.

Taxes
You will be required to pay all delinquent or outstanding property taxes at the time of closing. Property taxes must be paid on a semi-annual basis. However, if you refinance during the window when you taxes are due, but not delinquent, then you may be required to pay your installment in escrow since the property taxes are now a valid lien on your property.

Credit Tips:
Use the mortgage payment calculator for determining how much you can afford for your mortgage.



        

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