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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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