Types of Closing Costs: There are two broad nationwide categories of extra charges and fees that are usually found in settlement or closing transactions.

Charges for establishment and transfer of title: these involve the title search, title insurance, legal fees and settlement supervision fees.

Costs associated with obtaining the mortgage: these costs include surveys, appraisals, credit checks, loan documentation fees, notary charges, loan origination fees, commitment fees, processing fees, hazard insurance, interest prepayments, lender’s inspection fees, and underwriting fees.

Title: Who Owns What ? In buying a car, you see the owner’s registration certificate as proof of ownership or clear title. The burden of proof is upon him/her. When you go to buy a house the burden to provide clear title is usually the responsibility of the seller. The lender will not give you a mortgage until you can prove that the present owner of the property legally owns it.

Title Insurance: It is likely that a title insurance policy will be required even though a formal title search was completed. This is to guard against the possibility of error by whoever searched the title on the property. Errors in this area are pretty rare, but when they do occur, they are catastrophic for all parties concerned. The cost of this policy is a function of the value of the property and is often borne by the buyer. You have the right to ask the seller to pay half or all of the one time premium costs as part of your negotiations.

The title insurance policy lists the lender as the beneficiary. You would need to take out an owner’s title insurance policy to protect yourself. The additional premium cost will usually be only a fraction of the lender’s policy and is worth it for peace of mind.

Another major category of closing costs involves mortgage money. The following is a list of what this includes.

Loan Application Fee: This fee covers the initial costs of processing your loan request, checking your credit history and preparing the loan documents. The existence and amount of this fee varies from one lender to another; in many cases, this fee is not refundable even if the loan is not granted. Be sure to ask.

Property Appraisal Fees: ($160 – $275) All lenders require an opinion, usually by an independent appraiser, of the market value of the property being purchased. This opinion gives the lender some confidence that if the borrower defaults, the lender can recover its loan money from the sale of the property after foreclosure.

Loan Origination Fees: (1% - 3% of the loan amount; also know as points.) Each point equals 1% of the mortgage amount; they represent the equivalent of prepaid interest.

Private Mortgage Insurance (PMI): may be required by your lender if the loan you apply for cannot be granted because the loan does not meet the normal standard for the lender. The most common reason for this requirement is a smaller down payment than the lender requires (usually 20%). This insurance protects the lender from loss if the borrower defaults. It does not protect the borrower, though it may allow the borrower to qualify for a loan he/she could not otherwise get. This insurance will require an initial premium of 0.25% to 0.60% of you mortgage amount plus an additional monthly fee, depending on your loan structure.

Homeowners Hazard Insurance: ($180 – $400 per year) The borrower will be required to have a policy in effect at closing with the first year’s premium paid in full. This insurance is protecting against damage to the property by fire, wind, vandalism and other causes. Minimum coverage is to be no less that the mortgage amount.

Survey: ($400) A verification from a surveying firm will assure us that a lot containing a house has not encroached upon any other structures since the last full fledged survey was conducted. On occasion, a complete survey is required to ensure that the house and other structures are legally where you and the seller say they are.

(buyer or seller may be responsible for cost of the survey, depending on area.)

We would like to point out that there may be additional costs involved with your mortgage. They would be documented and explained before closing.