Mortgage closing costs.

When you talk to a lender, they usually prepare a "Good Faith
Estimate" of closing costs. Sometimes they will give it to you
right away, but they are only required to mail it to you within
three business days of application.

Because the lender is the one who prepares the estimate,
many buyers associate all the closing costs with the lender.
This is not correct. The lender is only preparing an estimate
of the costs you may incur when buying or refinancing and is
not required to list all potential costs. Nor does the lender
know what all the costs are actually going to be. The
estimate is an educated guess based on past experience.
Some things will get left out. Always anticipate the actual
costs are going to be more than the estimate.

When comparing two lenders, don't look at the "total" cost.
Only compare the costs actually charged by each lender.
Both lenders are only making informed guesses about costs
charged by others.

The following is a detailed summary of costs you may have
to pay when you buy or refinance your home. The costs are
listed in the order that they should appear on a Good Faith
Estimate you obtain from a mortgage lender.

There are two broad categories of closing costs. Non-
recurring closing costs are items that are paid once and you
never pay again. Recurring closing costs are items you pay
time and again over the course of home ownership, such as
property taxes and homeowner's insurance.

Some of the items that appear here do not traditionally
appear on a lender's Good Faith Estimate and lenders are
not required to show all of these items.

Non-Recurring Mortgage Closing Costs:

Loan Origination Fee - The loan origination fee is often
referred to as "points." One point is equal to one percent of
the mortgage loan. As a rule, if you are willing to pay more in
points, you will get a lower interest rate. On a VA or FHA loan,
the loan origination fee is one point. Anything in addition to
one point (on government loans) is called "discount points."

Loan Discount - On a government loan, the loan origination
fee is normally listed as one point or one percent of the loan.
Any points in addition to the loan origination fee are called
"discount points." On a conventional loan, discount points
are usually lumped in with the loan origination fee.

Appraisal Fee - Since your property serves as collateral for
the mortgage, lenders want to be reasonably certain of the
value and they require an appraisal. The appraisal looks to
determine if the price you are paying for the home is justified
by recent sales of comparable properties. The appraisal fee
varies, depending on the value of the home and the difficulty
involved in justifying value. Unique and more expensive
homes usually have a higher appraisal fee. Appraisal fees
on VA and FHA loans are higher than on conventional loans
because they require the appraiser to inspect items not
strictly associated with value.

Credit Report - As part of the underwriting review, your
mortgage lender will want to review your credit history. The
credit report can be as little as seven dollars, but normally
runs between $21 and $30, depending upon the type of
credit report required by your lender.

Lender's Inspection Fee - You normally find this on new
construction and is associated with what is called a 442
inspection. Since the property is not finished when the initial
appraisal is completed, the 442 inspection verifies that
construction is complete with carpeting and flooring
installed.

Mortgage Broker Fee - About seventy percent of loans are
originated through mortgage brokers and they will
sometimes list your points in this area instead of under Loan
Origination Fee. They may also add in any broker processing
fees in this area. The purpose is so that you clearly
understand how much is being charged by the wholesale
lender and how much is charged by the broker. Wholesale
lenders offer lower costs/rates to mortgage brokers than you
can obtain directly, so you are not paying "extra" by going
through a mortgage broker.

Tax Service Fee - During the life of your loan you will be
making property tax payments, either on your own or through
your impound account with the lender. Since property tax
liens can sometimes take precedence over a first mortgage,
it is in your lender's interest to pay an independent service to
monitor property tax payments. This fee usually runs
between $70 and $80.

Flood Certification Fee - Your lender must determine
whether or not your property is located in a federally
designated flood zone. This is a fee usually charged by an
independent service to make that determination.

Flood Monitoring - From time to time flood zones are re-
mapped. Some lenders charge this fee to maintain
monitoring on whether this re-mapping affects your property.

Other Lenders Fees

We put these in a separate category because they vary so
much from lender to lender and cannot be associated
directly with a cost of the loan. These fees generate income
for the lenders and are used to offset the fixed costs of loan
origination. The Processing Fee above can also be
considered to be in this category, but since it is listed higher
on the Good Faith Estimate Form we did not also include it
here. You will normally find some combination of these fees
on your Good Faith Estimate and the total usually varies
between $400 and $700.

Document Preparation - Before computers made it fairly
easy for lenders to draw their own loan documents, they
used to hire specialized document preparation firms for this
function. This was the fee charged by those companies.
Nowadays, lenders draw their own documents. This fee is
charged on almost all loans and is usually in the
neighborhood of $200.

Underwriting Fee - Once again, it is difficult to determine the
exact cost of underwriting a loan since the underwriter is
usually a paid staff member. This fee is usually in the
neighborhood of $300 to $350.

Administration Fee - If an Administration fee is charged, you
will probably find there is no Underwriting Fee. This is not
always the case.

Appraisal Review Fee - Even though you will probably not
see this fee on your Good Faith Estimate, it is charged
occasionally. Some lenders routinely review appraisals as a
quality control procedure, especially on higher valued
properties. The fee can vary from $75 to $150.

Wire Transfer Fee - in the "olden days" lenders usually
funded their loans with a check. Because of changes made
in state laws to benefit banks and savings & loans, mortgage
bankers mostly switched to funding by wire, which provided
an excellent opportunity to add a new fee to the list of closing
costs.