Closing Tips & Checklist For Home Buyers

Purchasing a new home includes more cash than an earnest money check for the down payment and a few hundred dollars for a home inspection.  Closing costs can be up to 2-4 percent, which typically includes: title insurance policies, recording fees, home inspection fees, courier charges, and other lender fees.   Several other factors that determine closing costs are points and origination fees, which are common lender charges to factor in to the equation.  The summary of fees for closing costs are disclosed on the Good Faith Estimate (GFE), so be sure to review a couple before closing.  

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Prior to committing with a mortgage broker or lender, get a few Good Faith Estimates from potential lenders and mortgage brokers.  Comparing at least three (3) GFEs will provide a financial picture for you to make an informed decision.  For example, total closing costs for a $400,000 home could cost approximately $4,000 to $16,000, so doing your homework can save you thousands of dollars.  Below is a list of common closing costs for home buyers:

One-Time Closing Costs
The fees that are paid once at closing are as follows:

• Home inspection
• Title policies
• Escrow or closing
• Notary fees
• Survey fee
• Wire fees
• Courier/Delivery (i.e. FedEx, UPS)
• Attorney fees
• Endorsements
• Recording fees
• State, County, and/or City Transfer Taxes
• Lender fees paid in conjunction with the loan on HUD-1, line 800
• Loan discount fees
• Loan origination fees
• Documentation processing fees

Prepaid & Recurring Closing Costs
These fees will be paid again in the future, such as:

• Property taxes
• PMI (if applicable)
• Prepaid interest
• Flood insurance (if required)
• Fire insurance premium

Depending on the time of year that you close, will determine the prorated amount the lender will collect for future insurance premiums and taxes.  Click here for a list of settlement or closing costs from HUD.  Be sure to have your real estate professional review the HUD with you prior to your closing.  

What to expect on Closing Day?

• Present paid homeowner’s insurance policy or binder and receipt with proof that premium has been paid.
• Closing agent will list the money you owe the seller, such as: remainder of down payment, prepaid taxes, etc.
• Monies the seller owes the buyer, such as unpaid taxes, credit for repairs, credit for HOA fees, and other concessions negotiated.  
• Seller to provide proof of warranties, copies of invoices for repairs, etc.
• After you review and understand the documentation, you will sign the mortgage.  Signing the mortgage means that the lender has the right to sell the property if you do not make payments.  
• Sign a mortgage note, which is a promise to repay the home loan.  
• Seller will provide the title to the house in the form of a signed deed.
• The lender’s agent will paid be paid closing costs, and provide you with a settlement statement of all items that you paid for in the transaction.  
• The deed and mortgage will be recorded at the Registry of Deeds.
• Congratulations you are now a homeowner.

Documentation You Receive At Closing

• Settlement Statement, HUD-1 Form

• Itemized list of services provided and fees associated with services
• Filled out by closing agent
• Must be provided at or before closing
• Request a copy before closing
• Truth-in Lending Statement
• Mortgage Note
• Mortgage or Deed of Trust
• Binding Sales Contract
• Prepared by the seller
• Have your attorney review the contract
• Keys to your new home

Below is a list of specific ‘Settlement Costs’ from the U.S. Department of Housing and Urban Development:


A. Specific Settlement Costs
This part of the Booklet discusses the settlement services which you may be required to get and pay for and which are itemized in Section L of the HUD-1 Settlement Statement. You also will find a sample of the HUD-1 form to help you to understand the settlement transaction.
When shopping for settlement services, you can use this section as a guide, noting on it the possible services required by various lenders and the different fees quoted by service providers. Settlement costs can increase the cost of your loan, so compare carefully.
700. Sales/Broker's Commission: This is the total dollar amount of the real estate broker’s sales commission, which is usually paid by the seller. This commission is typically a percentage of the selling price of the home.

L. SETTLEMENT CHARGES
700. TOTAL SALES/BROKER’S COMMISSION based on price $ @ %=	PAID FROM BORROWER’S FUNDS AT SETTLEMENT	PAID FROM SELLER’S FUNDS AT SETTLEMENT
Division of Commission (line 700) as follows:
701. $ to
702. $ to
703. Commission paid at Settlement
704.

800. Items Payable in Connection with Loan: These are the fees that lenders charge to process, approve and make the mortgage loan:
801. Loan Origination: This fee is usually known as a loan origination fee but sometimes is called a "point" or "points." It covers the lender's administrative costs in processing the loan. Often expressed as a percentage of the loan, the fee will vary among lenders. Generally, the buyer pays the fee, unless otherwise negotiated.
802. Loan Discount: Also often called "points" or "discount points," a loan discount is a one-time charge imposed by the lender or broker to lower the rate at which the lender or broker would otherwise offer the loan to you. Each "point" is equal to one percent of the mortgage amount. For example, if a lender charges two points on a $80,000 loan this amounts to a charge of $1,600.
803. Appraisal Fee: This charge pays for an appraisal report made by an appraiser.
804. Credit Report Fee: This fee covers the cost of a credit report, which shows your credit history. The lender uses the information in a credit report to help decide whether or not to approve your loan and how much money to lend you.
805. Lender's Inspection Fee: This charge covers inspections, often of newly constructed housing, made by employees of your lender or by an outside inspector. (Pest or other inspections made by companies other than the lender are discussed in line 1302.)
806. Mortgage Insurance Application Fee: This fee covers the processing of an application for mortgage insurance.
807. Assumption Fee: This is a fee which is charged when a buyer "assumes" or takes over the duty to pay the seller’s existing mortgage loan.
808. Mortgage Broker Fee: Fees paid to mortgage brokers would be listed here. A CLO fee would also be listed here.

800. ITEMS PAYABLE IN CONNECTION WITH LOAN
801. Loan Origination Fee %
802. Loan Discount %
803. Appraisal Fee to
804. Credit Report to
805. Lender’s Inspection Fee
806. Mortgage Insurance Application Fee to
807. Assumption Fee
808. Mortgage Broker Fee
809.
810.
811.

900. Items Required by Lender to Be Paid in Advance: You may be required to prepay certain items at the time of settlement, such as accrued interest, mortgage insurance premiums and hazard insurance premiums.
901. Interest: Lenders usually require borrowers to pay the interest that accrues from the date of settlement to the first monthly payment.
902. Mortgage Insurance Premium: The lender may require you to pay your first year’s mortgage insurance premium or a lump sum premium that covers the life of the loan, in advance, at the settlement.
903. Hazard Insurance Premium: Hazard insurance protects you and the lender against loss due to fire, windstorm, and natural hazards. Lenders often require the borrower to bring to the settlement a paid-up first year’s policy or to pay for the first year's premium at settlement.
904. Flood Insurance: If the lender requires flood insurance, it is usually listed here.

900. ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE

901. Interest from to @$ /day
902. Mortgage Insurance Premium for months to
903. Hazard Insurance Premium for years to
904. years to
905.

1000 - 1008. Escrow Account Deposits: These lines identify the payment of taxes and/or insurance and other items that must be made at settlement to set up an escrow account. The lender is not allowed to collect more than a certain amount. The individual item deposits may overstate the amount that can be collected. The aggregate adjustment makes the correction in the amount on line 1008. It will be zero or a negative amount.

1000. RESERVES DEPOSITED WITH LENDER
1001. Hazard Insurance months @ $ per month
1002. Mortgage insurance months @ $ per month
1003. City property taxes months @ $ per month
1004. County property taxes months @ $ per month
1005. Annual assessments months @ $ per month
1006. months @ $ per month
1007. months @ $ per month
1008. Aggregate Adjustment

1100. Title Charges: Title charges may cover a variety of services performed by title companies and others. Your particular settlement may not include all of the items below or may include others not listed.
1101. Settlement or Closing Fee: This fee is paid to the settlement agent or escrow holder. Responsibility for payment of this fee should be negotiated between the seller and the buyer.
1102-1104. Abstract of Title Search, Title Examination, Title Insurance Binder: The charges on these lines cover the costs of the title search and examination.
1105. Document Preparation: This is a separate fee that some lenders or title companies charge to cover their costs of preparation of final legal papers, such as a mortgage, deed of trust, note or deed.
1106. Notary Fee: This fee is charged for the cost of having a person who is licensed as a notary public swear to the fact that the persons named in the documents did, in fact, sign them.
1107. Attorney's Fees: You may be required to pay for legal services provided to the lender, such as an examination of the title binder. Occasionally, the seller will agree in the agreement of sale to pay part of this fee. The cost of your attorney and/or the seller’s attorney may also appear here. If an attorney's involvement is required by the lender, the fee will appear on this part of the form, or on lines 1111, 1112 or 1113.
1108. Title Insurance: The total cost of owner's and lender's title insurance is shown here.
1109. Lender's Title Insurance: The cost of the lender’s policy is shown here.
1110. Owner's (Buyer’s) Title Insurance: The cost of the owner's policy is shown here.

1100. TITLE CHARGES
1101. Settlement or closing fee to
1102. Abstract or title search to
1103. Title examination to
1104. Title insurance binder to
1105. Document preparation to
1106. Notary fees to
1107. Attorney’s fees to
(includes above items numbers; )
1108. Title Insurance to
(includes above items numbers; )
1109. Lender’s coverage $
1110. Owner’s coverage $
1111.
1112.
1113.

1200. Government Recording and Transfer Charges: These fees may be paid by you or by the seller, depending upon your agreement of sale with the seller. The buyer usually pays the fees for legally recording the new deed and mortgage (line 1201). Transfer taxes, which in some localities are collected whenever property changes hands or a mortgage loan is made, can be quite large and are set by state and/or local governments. City, county and/or state tax stamps may have to be purchased as well (lines 1202 and 1203).

1200. GOVERNMENT RECORDING AND TRANSFER CHARGES
1201. Recording fees: Deed $ ; Mortgage $ ; Releases $
1202. City/county tax/stamps: Deed $ ; Mortgage $
1203. State tax/stamps: Deed $ ; Mortgage $
1204.
1205.

1300. Additional Settlement Charges:
1301. Survey: The lender may require that a surveyor conduct a property survey. This is a protection to the buyer as well. Usually the buyer pays the surveyor's fee, but sometimes this may be paid by the seller.
1302. Pest and Other Inspections: This fee is to cover inspections for termites or other pest infestation of your home.
1303-1305. Lead-Based Paint Inspections: This fee is to cover inspections or evaluations for lead-based paint hazard risk assessments and may be on any blank line in the 1300 series.

1300. ADDITIONAL SETTLEMENT CHARGES
1301. Survey to
1302. Pest inspection to
1303.
1304.
1305.

1400. Total Settlement Charges: The sum of all fees in the borrower's column entitled "Paid from Borrower's Funds at Settlement" is placed here. This figure is then transferred to line 103 of Section J, "Settlement charges to borrower" in the Summary of Borrower's Transaction on page 1 of the HUD-1 Settlement Statement and added to the purchase price. The sum of all of the settlement fees paid by the seller are transferred to line 502 of Section K, Summary of Seller's Transaction on page 1 of the HUD-1 Settlement Statement.

1400. TOTAL SETTLEMENT CHARGES (enter on lines 103, Section J and 502, Section K)

Paid Outside Of Closing ("POC"): Some fees may be listed on the HUD-1 to the left of the borrower’s column and marked "P.O.C." Fees such as those for credit reports and appraisals are usually paid by the borrower before closing/settlement. They are additional costs to you. Other fees such as those paid by the lender to a mortgage broker or other settlement service providers may be paid after closing/settlement. These fees are usually included in the interest rate or other settlement charge. They are not an additional cost to you. These types of fees will not be added into the total on Line 1400.