| What Are Closing Costs?
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| | mortgage amount. For example, if a lender
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| When selling your home "For Sale by
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| | charges two points on a $80,000 loan this
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| Owner" (aka FSBO), your lender usually
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| | amounts to a charge of $1,600.
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| prepares a "Good Faith Estimate" of
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| | 5. Appraisal Fee: This charge pays for an
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| closing costs. You are entitled to
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| | appraisal report made by an appraiser.
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| receive this estimate no later than three
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| | 6. Credit Report Fee: This fee covers the
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| business days after you apply for a loan.
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| | cost of a credit report, which shows your
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| Because it is an estimate of the costs
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| | credit history. The lender uses the
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| you may incur, it may not contain all
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| | information in a credit report to help
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| potential costs. The lender will not know
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| | decide whether or not to approve your
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| what all of the costs are going to be.
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| | loan and how much money to lend you.
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| The "Good Faith Estimate" will be an
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| | 7. Lender's Inspection Fee: This charge
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| estimate based on previous experience.
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| | covers inspections, often of newly
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| Actual closing expenses usually exceed
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| | constructed housing, made by employees of
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| the estimate. To avoid problems, go
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| | your lender or by an outside inspector.
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| prepared to pay more than the amount
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| | 8. Mortgage Insurance Application Fee:
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| listed on your estimate.
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| | This fee covers the processing of an
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| If you are comparing two lenders, look
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| | application for mortgage insurance.
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| only at the costs charged by the lender.
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| | 9. Assumption Fee: This is a fee which is
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| Lenders can only make educated guesses
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| | charged when a buyer "assumes" or takes
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| about the charges made by others.
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| | over the duty to pay the seller's
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| You will receive an itemization of costs
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| | existing mortgage loan.
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| you may have to pay when you buy your
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| | 10. Mortgage Broker Fee: Fees paid to
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| home. The costs are listed in the order
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| | mortgage brokers would be listed here. A
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| that they should appear on a Good Faith
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| | CLO fee would also be listed here.
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| Estimate you obtain from a mortgage
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| | 11. Interest: Lenders usually require
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| lender.
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| | borrowers to pay the interest that
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| There are two broad categories of closing
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| | accrues from the date of settlement to
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| costs. Non-recurring closing costs are
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| | the first monthly payment.
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| items that are paid once and you never
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| | 12. Mortgage Insurance Premium: The
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| pay again such as loan origination fees,
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| | lender may require you to pay your first
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| recording fees, survey fees, etc.
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| | year's mortgage insurance premium or a
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| Recurring closing costs are items you pay
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| | lump sum premium that covers the life of
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| again over the course of home ownership,
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| | the loan, in advance, at the settlement.
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| such as property taxes and homeowner's
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| | 13. Hazard Insurance Premium: Hazard
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| insurance.
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| | insurance protects you and the lender
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| Closing costs are usually made up of the
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| | against loss due to fire, windstorm, and
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| following:
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| | natural hazards. Lenders often require
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| 1. Attorney's or escrow fees (yours and
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| | the borrower to bring to the settlement a
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| your lender's if applicable)
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| | paid-up first year's policy or to pay for
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| 2. Property taxes (to cover tax period to
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| | the first year's premium at settlement.
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| date)
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| | 14. Flood Insurance: If the lender
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| 3. Interest (paid from date of closing to
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| | requires flood insurance, it is usually
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| 30 days before first monthly payment)
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| | listed here.
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| 4. Loan origination fee (covers lender's
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| | 15. Title Charges: Title charges may
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| administrative costs)
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| | cover a variety of services performed by
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| 5. Recording fees
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| | title companies and others. Your
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| 6. Survey fee
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| | particular settlement may not include all
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| 7. First premium of mortgage insurance
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| | of the items below or may include others
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| (if applicable)
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| | not listed.
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| 8. Title insurance (yours and your
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| | 16. Settlement or Closing Fee: This fee
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| lender's)
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| | is paid to the settlement agent or escrow
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| 9. Loan discount points
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| | holder. Responsibility for payment of
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| 10. First payment to escrow account for
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| | this fee should be negotiated between the
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| future real estate taxes and insurance
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| | seller and the buyer.
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| 11. Paid receipt for homeowner's
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| | 17. Abstract of Title Search, Title
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| insurance policy (and fire and flood
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| | Examination, Title Insurance Binder: The
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| insurance if applicable)
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| | charges on these lines cover the costs of
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| 12. Any documentation preparation fees.
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| | the title search and examination.
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| On closing day, you'll present your paid
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| | 18. Document Preparation: This is a
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| homeowner's insurance policy or a binder
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| | separate fee that some lenders or title
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| and receipt showing that the premium has
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| | companies charge to cover their costs of
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| been paid. The closing agent will then
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| | preparation of final legal papers, such
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| list the money you owe the seller
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| | as a mortgage, deed of trust, note or
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| (remainder of down payment, prepaid
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| | deed.
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| taxes, etc.) and then the money the
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| | 19. Notary Fee: This fee is charged for
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| seller owes you (unpaid taxes and prepaid
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| | the cost of having a person who is
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| rent, if applicable). The seller will
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| | licensed as a notary public swear to the
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| provide proofs of any inspection,
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| | fact that the persons named in the
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| warranties, etc.
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| | documents did, in fact, sign them.
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| Once you're sure you understand all the
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| | 20. Attorney's Fees: You may be required
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| documentation, you'll sign the mortgage,
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| | to pay for legal services provided to the
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| agreeing that if you don't make payments
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| | lender, such as an examination of the
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| the lender is entitled to sell your
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| | title binder. Occasionally, the seller
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| property and apply the sale price against
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| | will agree in the agreement of sale to
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| the amount you owe plus expenses. You'll
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| | pay part of this fee. The cost of your
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| also sign a mortgage note, promising to
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| | attorney and/or the seller's attorney may
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| repay the loan. The seller will give you
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| | also appear here. If an attorney's
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| the title to the house in the form of a
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| | involvement is required by the lender.
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| signed deed.
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| | 21. Title Insurance: The total cost of
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| You'll pay the lender's agent all closing
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| | owner's and lender's title insurance is
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| costs and, in turn, he or she will
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| | shown here.
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| provide you with a settlement statement
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| | 22. Lender's Title Insurance: The cost of
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| of all the items for which you have paid.
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| | the lender's policy is shown here.
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| The deed and mortgage will then be
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| | 23. Government Recording and Transfer
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| recorded in the state Registry of Deeds,
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| | Charges: These fees may be paid by you or
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| and you will be a homeowner.
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| | by the seller, depending upon your
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| At closing, you will get:
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| | agreement of sale with the seller. The
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| 1. Settlement Statement
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| | buyer usually pays the fees for legally
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| 2. HUD-1 Form (itemizes services provided
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| | recording the new deed and mortgage (line
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| and the fees charged; it is filled out by
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| | 1201). Transfer taxes, which in some
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| the closing agent and must be given to
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| | localities are collected whenever
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| you at or before closing)
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| | property changes hands or a mortgage loan
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| 3. Truth-in-Lending Statement
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| | is made, can be quite large and are set
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| 4. Mortgage Note
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| | by state and/or local governments. City,
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| 5. Mortgage or Deed of Trust
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| | county and/or state tax stamps may have
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| 6. Binding Sales Contract (prepared by
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| | to be purchased as well
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| the seller; your lawyer should review it)
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| | 24. Survey: The lender may require that a
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| 7. Keys to your new home
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| | surveyor conduct a property survey. This
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| Your Settlement Costs are going to
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| | is a protection to the buyer as well.
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| consist of the following:
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| | Usually the buyer pays the surveyor's
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| 1. Sales/Broker's Commission: This is the
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| | fee, but sometimes this may be paid by
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| total dollar amount of the real estate
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| | the seller.
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| broker's sales commission, which is
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| | 25. Pest and Other Inspections: This fee
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| usually paid by the seller. This
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| | is to cover inspections for termites or
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| commission is typically a percentage of
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| | other pest infestation of your home.
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| the selling price of the home.
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| | 26. Lead-Based Paint Inspections: This
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| 2. Items Payable in Connection with Loan:
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| | fee is to cover inspections or
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| These are the fees that lenders charge to
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| | evaluations for lead-based paint hazard
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| process, approve and make the mortgage
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| | risk assessments.
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| loan.
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| | 27. Total Settlement Charges: The sum of
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| 3. Loan Origination: This fee is usually
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| | all fees in the borrower's column
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| known as a loan origination fee but
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| | entitled "Paid from Borrower's Funds at
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| sometimes is called a "point" or
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| | Settlement" is placed here. This figure
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| "points." It covers the lender's
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| | is then transferred to line 103 of
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| administrative costs in processing the
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| | Section J, "Settlement charges to
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| loan. Often expressed as a percentage of
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| | borrower" in the Summary of Borrower's
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| the loan, the fee will vary among
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| | Transaction on page 1 of the HUD-1
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| lenders. Generally, the buyer pays the
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| | Settlement Statement and added to the
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| fee, unless otherwise negotiated.
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| | purchase price. The sum of all of the
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| 4. Loan Discount: Also often called
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| | settlement fees paid by the seller are
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| "points" or "discount points," a loan
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| | transferred to line 502 of Section K,
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| discount is a one-time charge imposed by
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| | Summary of Seller's Transaction on page 1
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| the lender or broker to lower the rate at
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| | of the HUD-1 Settlement Statement.
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| which the lender or broker would
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| | Don't be overwhelmed by all of the fees
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| otherwise offer the loan to you. Each
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| | and charges. Your closing agent will go
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| "point" is equal to one percent of the
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| | over each item one line at a time.
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