What is a good
faith estimate? By Bankrate.com
Your lender is required by the federal Real Estate
Settlement Procedures Act to provide you with a good faith estimate
of the fees due at closing within three days of applying for a loan.
These mortgage fees, also called settlement costs,
cover every expense associated with your home loan: inspections,
title insurance, taxes and other charges.
Because closing costs typically amount to between
3 and 5 percent of the sale price, it is best to wait until you
receive the good faith estimate before signing any loan. In fact,
smart shoppers will obtain good faith estimates from several lenders,
compare their costs, then ask their chosen lender to meet or beat
the competition's best offer.
Here's a list of some of the fees you'll find listed
on your good faith estimate (for an average price range, see table
of closing costs below):
- Loan application and credit report
- Title search and title insurance
- Lender's attorney
- Property appraisal
- Inspection
- Survey
- Document recording
- Transfer taxes
- Buyer's attorney
- Documentary stamps on new note
- Points and origination
- Condominium application
- Escrow account balances/prepaids
Title Insurance
Title insurance insures against errors in the title search and guarantees
that you and your lender retain financial interest in the property.
A title search checks for liens, encumbrances and legal errors,
as well as fraud, forgery, missing heirs or divorce proceedings
that could affect your rights of ownership, possession or use of
the property.
The required title insurance only protects the
lender, so if the property has a long and checkered history, you
may want to take out an owner's title insurance policy to protect
yourself. If the property is relatively new, you may be able to
lower the cost of title insurance by asking your insurer for a reissue
rate if there have been no claims against the title since the previous
title search was done. If you and the seller are both getting title
insurance, you may save by using the same insurer, who then only
has to research the property once for both of you.
Escrow
At closing you may have to put aside money into special escrow accounts
to insure that such things as private mortgage insurance (PMI),
property taxes and homeowners insurance are paid on time. Federal
law limits the amount of escrow "cushion" to two months
of payments. Be sure to ask the lender what escrow payments will
be required at closing; some mortgage companies may waive escrow
requirements if you pay more points or a higher interest rate.
Ways to Save at Closing
- Many closing costs are standard and won't
vary from lender to lender, for instance appraisals, credit reports,
title insurance, government stamps and recording fees. Others,
however, may be eliminated simply by opting out of a service,
such as overnight delivery of documents. If a fee seems vague
or questionable, ask. Some mortgage companies include so-called
junk fees that you can eliminate or reduce.
- Because all mortgage loan payments are due
on the first of the month, you can avoid or reduce the prepaid
interest due by closing on or near the last day of the month.
- Remember, you can always negotiate with the
seller to have them split or pay outright some of the closing
costs, points or fees.
| Loan application and credit report |
$75 to $300
|
$75 to $400
|
$75 to $400
|
| Loan origination fee (1%) |
$500
|
$1,000
|
$2,000
|
| Points (1 to 3%) |
$500 to $1,500
|
$1,000 to $3,000
|
$2,000 to $6,000
|
| Title search and insurance fees |
450 to $600
|
$450 to $600
|
$450 to $600
|
| Lender's attorney |
$150 to $400
|
$150 to $400
|
$150 to $400
|
| Appraisal |
$150 to $400
|
$150 to $400
|
$150 to $400
|
| Homeowners insurance |
$300 to $600
|
$500 to $800
|
$700 to $1,000
|
| PMI |
$350 to $675
|
$750 to $1,500
|
$900 to $1,750
|
| Inspections |
$175 to $300
|
$175 to $300
|
$175 to $300
|
| Survey |
$125 to $400
|
$125 to $400
|
$125 to $400
|
| Recording fees |
$40 to $60
|
$75 to $150
|
$100 to $200
|
| Transfer taxes |
$75 to $1,125
|
$75 to $1,125
|
$75 to $1,125
|
| Buyer's attorney |
$400 to $700
|
$1,200 to $1,500
|
$1,500 to $3,000
|
| Escrow deposit for taxes* (depends
on closing date) |
$100 to $800
|
$100 to $2,400
|
$100 to $3,000
|
| Partial month's interest* (depends
on closing date) |
$20 to $400
|
$50 to $1,200
|
$100 to $2,400
|
| Subtotals |
$3,335 to $8,660
|
$6,125 to $8,850
|
$9,550 to $22,975
|
| Plus down payment |
$5,000
|
$10,000
|
$20,000
|
| Totals |
$8,335 to $13,660
|
$16,800 to $18,850
|
$29,500 to $42,975
|
| * Real estate closing practices
vary widely from state to state and county to county. Where
you live will determine what you will have to pay. Even if you
are not required to prepay into an escrow account for taxes,
you may want to set aside this amount to assure that you will
be able to pay these bills when they fall due. |
|
