Let’s look at one purchase transaction’s closing disclosure (CD). Click to see the example CD and please download.
Section A – Origination Charges (Lender fees)
When you work with AAXY Mortgage, we usually split this section into 2 parts: one is a flat fee, and the other is a percentage of the loan amount. The lender fees are related to the market and the rate which will be selected. Usually, the lower the rate is, the higher the fees are. When you shop around, it is suggested that you compare the total fees using the same rate when comparing different products.
In the example CD, the flat fee is $995, and the point charge is 0.35% of loan amount. The total is $1677.50.
Section B – Services Borrower cannot Shop for
This section can also be treated as lender controlled fees. The fees in this section are pretty similar even among different loans.
Appraisals usually cost between $475 and $550. For some larger or further away houses, it may cost more. When the loan amount is over $1,000,000, 2 independent appraisal reports are required.
Flood Certificate: $14.12. This cost is rounded up as $15 on Loan Estimates.
Tax certificate or Tax service fee: between $70 and $99. In this case it is $80.
Credit Report: for two borrowers, the cost has recently increased to be around $53.
Lender’s Attorney Fee: $125
It is possible to have a Deed Review fee if the seller insists on not using a lender prepared warranty deed, and in this case, the lender’s attorney will charge $85 to review the deed prepared by others. Such cases are not common though.
In the example, the total fee in this section is $794.12. The Appraisal is usually paid in advance (out of closing), so it is listed on the CD, but not as a charge. The costs in this part will not vary by much.
Section C – Services Borrower can Shop for
In this section, the fees listed are those that are not controlled by lenders. In most cases, the lender’s estimates on those fees listed on the loan estimate are not accurate. However, current regulation does require lenders to give an accurate estimate when borrowers decide to use the lenders’ referred service providers.
This part is mainly for the survey and title company’s costs.
In the example, the survey costs $550. If the house is a resale house, usually the seller will provide a copy of the existing survey. If it’s acceptable to the title company, then a new survey will not be required at all, thus eliminating that potential cost. In the case that a new survey is required, I recommend buyers to shop around and order survey themselves. If you are letting someone else order it, it will likely cost more than you order it yourself.
Title company’s Closing/Escrow Fee – This fee ranges from “0” (yes, no fee) to $600, depending on which title company is to be used for a transaction. The lender has no control over the selection of a title company.
The recording fee is a small fee that some title companies charge and others don’t.
Title – Lender’s title insurance. Title insurance is a Texas State regulated item. You may refer to another article of mine about title insurance.
Title – Endorsement fees. The total cost depends on what kind of endorsements the lender requires, and the lender’s requirements are based on the property’s situation, such as whether it belongs to an Homeowner association and if an existing survey is used.
In most Texas purchase transactions (but not all), the seller will pay for the owner’s title insurance. If this is the case, the buyer’s total title cost should be from $500 to $1000. As you can see in the example, the seller gives a credit of $1301 on page 3 L- 06 for owner’s title policy, so the actual total borrower-paid title fee is $748.94 (survey is not title fee).
Above are major “closing costs” in a purchase transaction. You can tell that it is usually around $3000 (after receiving credit from seller for owner title insurance).
Other Costs
- Tax and Recording Fee: This is local government charge. In Texas, currently there’s no tax on real estate transactions. The county only charges a fee for recording the loan document (Deed of Trust).
- Pre-paid items: Usually 2 items are listed here – the hazard insurance and prepaid interest. The borrower has the right to select any qualified insurance company to buy a policy as long as the coverage meets lender’s requirement. The prepaid interest is for the month of closing.
- Initial Escrow Payment: When the loan is setup with an escrow account, the lender charges initial escrow fees. Usually it is about 2-month’s worth of tax and insurance. Please see another article of mine if you want to learn more about Escrow accounts. This part of the money is not taken away; it is saved in an escrow account and still belongs to the borrower. If a borrower selects not to have an escrow account and the lender approves, this section should be “0”.
- Other: This section is for fees that are not required, but necessary for a specific transaction, such as HOA charges. Owner’s title insurance is also listed here (In this case, the seller pays).
There might be other adjustments like when non-realty items are included in the transaction or a certain party gives/receives a credit.
In our example, the total settlement charges (total closing cost) are $8246.29. When you buy a home, it is important to have enough funds prepared for closing, as it will not only be the down payment.
If you have any question concerning this article, please contact the author Xiaomin James Wu. His cell phone number is (512) 785-3841.
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