Buyers who want to learn about lender’s fees usually spend a half hour to an hour with me reviewing these fees and discussing alternatives. Many buyers like a lesson before they even look at houses. For sure, I want to take the time to explain each fee in detail with you and every buyer before we prepare an offer or sign a contract to buy a house.
Refinancing? I have advice about that, too.
Here Are the Basics
Loan Origination Fee
Under $1,000 with most lenders in our market currently. This is the part of the closing costs that the lender actually gets to keep. They are free to make up creative names for more fees, but this one is the most common.
Points (optional)An option for the home buyer is to pay points to lower the interest rate at which the loan will be repaid. Each point equals 1 percent of the mortgage amount. For example: on a $100,000 loan, 1 point would equal $1,000, 3 points would be $3,000, and so on… Half that for a $50,000 loan, 3x that for a $300,000 loan, and so on…
Appraisal FeeThe fee for having the house appraised may be incorporated into the closing costs or payment may be required by the lender at the time the loan application is submitted. Usually about $400 in Topeka for conventional loans, $500 for FHA/VA.
Credit ReportThe lender uses a credit report to determine the creditworthiness of the loan applicant. This fee is often paid when the loan application is submitted. Maybe $15, maybe $50. A mortgage lender’s research is usually more extensive than any other credit report, therefore more expensive.
Interest PaymentTypically the buyer is required to pay interest on the mortgage loan to cover the time between the closing date and when the first mortgage payment period begins. For example: If closing is on May 15. Your first monthly payment begins to accrue interest on June 1 with your first mortgage payment due July 1. At closing, an interest payment covering the accrual period between May 15 and May 31 may be required. This is a “pay me now or pay me later” expense. Borrowers will pay interest for each and every day they use a lender’s money sooner or later. Period. The only question is when the interest will be paid.
Escrow AccountAt closing a payment may be required to fund the escrow account if the lender is paying home insurance, property taxes, and/or other expenses out of the escrow account. This is just the lender making sure that plentiful money will always be available to pay taxes, insurance, and mortgage insuring premiums, if any, as they come due. It’s common to sock away a couple of months pro-rated homeowner’s insurance premium, a couple of months taxes and a couple of months mortgage insurance premium at closing to pad that account to cover future fees.
- Expect to pay the state of Kansas up to .26 % of the loan amount in mortgage registration tax. ($260 for a $100,000 loan)
- Simplified surveys run $100 – $150. Real surveys cost $650.
- Recording fees to record your new deed and your new mortgage in your name with the county-run about $200.
- Title coverage for your lender might be $400.
- Lenders are required to hire an outside company’s opinion on floodplain status. Guess who pays? Maybe $25.
- Closing fee: $250 – $400.
- And don’t forget to budget for inspections. Most buyers spend $500 – $1,500.