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    Question ID:   19523         Current Version: 1
Question: What are the types of mortgage loan settlement costs?
Category: Business & Finance > Renting & Real Estate
Keywords: type, mortgage loan, settlement cost, fee
Type: what
Rating:(0 ratings)    Views: 17    Discussions: 0   In Watch Lists: 1  

 
    Answer:

Most people associate settlement costs with mortgage loan charges. These fees and charges vary, so it pays to shop around for the best combination of mortgage terms and settlement costs. Mortgage-related costs that may apply to your loan include the following items.

  • Application fee

Imposed by your lender or broker, this charge covers the initial costs of processing your loan request and checking your credit report.

Estimated cost: $65 to $640, including the cost of the credit report for each applicant

Median cost: $365

  • Loan origination fee
  • Appraisal fee
  • Lender-required home inspection fees 
  • Private mortgage insurance (PMI)
  • FHA, VA, and RHS fees
  • Homeowner's insurance
  • Flood determination fee
  • Escrow (or reserve) funds
Other miscellaneous settlement costs

Depending upon the location and type of property purchased--and the extra settlement services you or your lender request--you may also have to pay some of the following fees and assessments.

  • Assumption fee. If you are assuming (or taking over) an existing mortgage, the lender may charge a fee.

Estimated cost: Depends on the lender, but will range from several hundred dollars to 1% of the amount of the loan you are assuming.

  • Prorated expenses between the seller and the buyer. In your purchase contract, you may agree to split some costs with the seller to cover your respective periods of ownership during the overarching calendar year or tax period, such as prorated property taxes. Some of these expenses may involve large amounts: for example, annual condominium fees, homeowners' association fees, water bills, and other lump-sum service charges.

Estimated cost: Depends on the agreement between the seller and the buyer.

  • Inspection costs/fees. As a buyer, if you make your purchase offer contingent on the results of a home inspection--such as testing for structural damage, water quality, and radon gas emissions--you will have to pay for these inspections.

Estimated cost: Costs vary regionally.

  • Escrow account funds. In the purchase contract, you can request that the seller set up an escrow account to cover any costs for repairs, radon mitigation, house painting, or other items. For example, if you do not test all the appliances (for instance, if you buy in the summer, you may not test the furnace), you may request an escrow account to cover repairs if they are needed in the future. The seller may agree to split the costs with you, in which case you would need these funds at settlement. Sellers sometimes offer home warranties in lieu of these arrangements and as an enticement to buyers. These warranties typically cover repairs or the replacement of plumbing and heating, major appliances, and other home systems not covered by other home insurance policies.
  • Estimated cost: Depends on cost of repairs and agreement between seller and buyer.
  • Fees paid to find a lender. As a borrower and buyer, you may work with a mortgage broker or other third party to secure a mortgage loan. For example, you may want to work with a broker to find a loan with nonstandard terms or conditions. Brokers arrange transactions rather than lend money directly; in other words, they find a lender for you. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you unless they have contracted with you to act as your agent.

Estimated cost: Depends on agreement with the broker and often is a percentage of the loan amount.

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