Some fees are paid when you apply for a loan (such as application, appraisal fees, home inspections), and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs. “No cost” loans are sometimes available, but they usually involve higher rates.
Ask what each fee includes. Sometimes items may be lumped into one fee. Don't be afraid to ask for an explanation of any fee you do not understand.
The following is a list of the typical charges. Each charge starts with a number – the same number is the number of the charge on a HUD-1 Real Estate Settlement Statement. This makes it easier to compare the charges a loan applicant receives on the good faith estimate to the HUD-1.
800 ITEMS PAYABLE IN CONNECTION WITH LOAN:
801 - Loan Origination Fee-This fee is a charge for originating or creating the loan
802 - Loan Discount-This is an upfront charge paid to the lender to get a lower mortgage rate – the same as “buying the rate down”
803 - Appraisal Fee-This is the cost of the independent appraisal. It is usually paid by the buyer.
804 - Credit Report-This is the cost of the credit report
805 - Lender's Inspection Fee-This is the lender's cost of inspecting a property – some may double check the appraisal provided by an independent appraiser (not the same as a buyer's personal inspection related to contract contingencies).
808 - Mortgage Broker Fee-This is the upfront charge that a mortgage broker charges. Brokers can also earn a “rebate” from the lender which is not listed here
809 - Tax Related Service Fee-Lender fee, usually small, for handling tax related matters
810 - Processing Fee-This is the charge for processing the loan – collecting the buyer's application, running credit, collecting pay stubs, bank statements, ordering appraisal, title, etc.
811 - Underwriting Fee-This is the cost of the loan underwriter or loan approver
812 - Wire Transfer Fee-This is the cost of wiring the money around, which is usually done by escrow.
900 ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE (prepaid costs)
901 - Interest for days X $ per day-This is the prepaid interest for a mortgage loan.
902 - Mortgage Insurance Premium-This is the prepaid mortgage insurance premium, if needed. This is the insurance premium some lenders charge for loans with little equity.
903 - Hazard Insurance Premium-This is used to record hazard insurance premiums that must be paid at settlement in order to have immediate insurance on the property. It is not used for insurance reserves that will go into escrow.
905 - VA Funding Fee-This is the Veterans Administration funding fee, and is only applicable for VA loans
1000 RESERVES DEPOSITED WITH LENDER
1001 - Hazard Insurance Premiums # months @ $ per month This is any prepayment of future hazard insurance expense
1002 - Mortgage Ins. Premium Reserves months @ $ per month-This is any prepayment of future mortgage insurance expense
1003 - School Tax months @ $ per month-This is any prepayment of future school tax expense
1004 - Taxes and Assessment Reserves months @ $ per month-This is any prepayment of future tax expenses, such as property taxes
1005 - Flood Insurance Reserves months @ $ per month months-This is any prepayment of future flood insurance expense
1008 - Aggregate Accounting Adjustment-This is a credit to the buyer. By law, the lender is not allowed to collect more than the sum of initial payments for reserve items. The aggregate adjustment is the amount the lender must 'credit' the borrower at closing, so that they don't collect more than the law allows.
1100 TITLE CHARGES
1101 - Closing or Escrow Fee-This is the cost of escrow. This is the service of a neutral party that actually handles the money between all the different parties in a real estate transaction, including: the lender, the buyer, the seller, the agents, notary, etc. This is often done by the “Title Company” – a related entity in the same office that provides title insurance
1105 - Document Preparation Fee-This is the charge for preparing the loan documents. Lenders often email the loan documents to the escrow company, which in turn prints them out and reviews them before signing. However, some title companies are owned by an attorney who will also draw certain legal documents for the buyer's closing.
1106 - Notary Fees-This is the cost of the notary. This is to have all of the legal documents surrounding this transaction notarized. When closing inside the title company office, there is usually no charge for this.
1107 - Attorney Fees-Any legal charges associated with clearing the title to the property.
1108 - Title Insurance-This is the cost of insuring the title of the property. If there is a question about title (who really owned the property), or if a judgment or lien was really paid off, after the transaction is done then this insurance protects the lender and owner from future problems.
1200 GOVERNMENT RECORDING & TRANSFER CHARGES
1201 - Recording Fees-This is the cost of updating relevant government records
1202 - City/County Tax/Stamps-Unavoidable government charge (death and taxes are unavoidable)
1203 - State Tax/Stamps-Unavoidable government charge
1204 - Electronic Recording Fee-Many counties now allow documents to be recorded electronically. This expedites the issuance of a title policy by several weeks.
1300 ADDITIONAL SETTLEMENT CHARGES
Anything 'extra' that is not included in the 800-1200 charges are itemized in the 1300 section. This includes things like the survey, HOA fees, and repairs.
1302 - Pest Inspection-This is the cost of the pest inspector. Their purpose is to document the state of the property that the lender is making the loan on.
