Fridays with the Fiddle Fig: Closing Costs
This week's topic: What are closing costs?
Purchase or refinance transactions require services from several entities and each one has fees connected to the services provided. There are two categories of fees
1. Non Recurring - These are one time, deductible fees associated with services provided.
2. Recurring or Prepaid - These are not considered fees. These are prorated cost associated with your monthly costs. These will include interest - tax insurance - homeowners dues and mortgage insurance.
Non-Recurring Closing Costs
Escrow - The escrow company charges fees for handling the escrow. It also charges for special services such as messenger fees or notary fees.
Title - The title company charges for title insurance and government fees.
Lender - The lender charges for loan related fees such as origination fees, credit, appraisal, processing and undercutting.
Recurring/Prepaid Closing Costs
Interest - On a purchase interest will be paid from the day before closing (also called funding) until the end of the month.
Insurance - On a purchase, one year premium must be collected. On a refinance they will have you bring in enough to bring 12 months current.
Taxes - Property taxes will be prorated and collected and if impounds have been requested the proper amount will be collected.
HOA - Homeowner association fee will be prorated and collected.
Mortgage Insurance - If this applies to you loan amounts will be collected.
Miscellaneous - Sometimes there are fees for property inspections, home warranties and real estate processing