Closing Costs Revealed!

Closing Costs are required costs associated with the closing of ANY real estate

transaction. If the transaction is “Cash Only” and there is no loan, there are still

costs to close.

Closing Costs can be the root of unnecessary confusion and concern for a

borrower. It is very important for a Loan Originator to fully discuss the Closing

Cost process at the “pre-approval” stage of a transaction, NOT once they are

already in escrow.

Closing costs can be one of the most expensive aspects of the transaction. In some

cases, the closing costs exceed the down payment. This depends entirely on the

type of loan program and transaction.

CLOSING COSTS are broken out into 2 categories: Re-Occurring and Non-

Reoccurring.

Re-Occurring:

These costs will continue AFTER the close of escrow. They include pre-paid

interest, taxes, insurance, and HOA fees (if applicable). These occur even if the

borrower never does another loan transaction. They are paid every month regardless. They are still part of the “cash due at closing”. The collections for taxes and insurance are known as “Pre-Paid Reserves” when they are collected in escrow to close a transaction. They can be the more expensive of the 2 categories. At various times of the year, taxes being collected can be a hefty cost to meet the established reserve requirements for an Impound/Escrow account.

Non-Reoccurring:

These only occur one time, to close the transaction. These are what most people

think of when they see “Closing Costs”. These include all 3rd party costs, Escrow,

Title, Lender, Underwriting, Loan Origination/Points, rate Buy-Downs, Loan

Processor, County Recording, HOA, Solar Transfers/re-recording, Appraisal,

Notary, Condo docs, etc.

It is often hard to estimate the total amount of closing costs without the identity of

the escrow and title companies who will be involved in the transaction. We will order fees from the identified escrow and title company listed in the purchase contract, immediately following the opening of escrow. This is to provide the borrower with a qualified Loan Estimate. The current regulations are very strict and allow for limited tolerance of change. This protects the borrower and us.

All 3rd party fees can vary from company to company.

Depending on the loan amount, I generally advise my borrowers to have access to

between 2%-3% of the purchase price, in available funds, to cover the total “cash

to close.”

If the loan amount is too small or too large that percentage will vary. Closing costs

can be paid for by the borrower, the seller, the Realtor, a lender’s credit, a gift, a

grant, or a combination thereof. All these scenarios will depend on the specific

loan type and circumstances of the loan file. This information should be discussed

with the borrower at the Pre-Approval phase, to determine how the costs will be

paid during the transaction.

Costs and when to expect to pay them:

Credit Report: Paid at the beginning of the Pre-Approval Process 2025 has brought about a 50% increase in the cost of pulling a Mortgage Tri-Merge credit report. The cost is currently estimated at $95.00 per person or per married couple. Many Loan Originators refund the cost back to you at the close of escrow.

Physical Inspection: Paid for in the first week of the escrow process.

This is generally organized by the Realtor, on behalf of the buyer. The cost does

vary from $450-$700 on most properties. It is NOT a required inspection by the

lender, however, is strongly recommended. The lender does NOT receive a copy of

this report as it is not required for loan approval.

Appraisal: Ordered generally in the first 2-7 days of opening of escrow

If an appraisal is required by the lender, it is generally ordered and paid for at the

time the order is placed. VA appraisals are NOT paid for/collected at the time of

the order. They are paid when escrow closes or within 30 days of the completed

appraisal. The buyer is still responsible for the fee, regardless if the transaction

closes or not. The average Conventional Appraisal is between $550-$750. The

FHA average appraisal fee is between $650-$850. The average VA appraisal fee is

between $650-$750.

Other Inspections: Paid at the time of order as needed. Generally,

during the first 2 weeks of the inspection time period, as per the contract.

Examples: Termite, Roof, Engineer, Plummer, General Contractor, pool expert,

etc. Costs vary per vendor. They can be as inexpensive as “Free” to thousands,

depending on the level of inspection and type.

Condo/Townhomes: Lender’s Condo Cert: Paid for at time of order/pre-final approval

$150-$500.

HOA/Insurance Policy Binder:

Paid for during escrow/to get loan docs $75-$150.

If you have any questions, comments, or concerns about any of the information in

this report, please feel free to contact me. I am happy to assist you, even if I am not

the lender you are currently working with.