Closing Costs Explained
by Tyler on 11/10/09
Buying a home is one of the most exciting accomplishments in one’s life. However, going to the settlement table with no idea of what to expect can be overwhelming. Looking at the settlement statement also known as HUD-1 statement can be very confusing. We all trust that our lender has steered us in the right direction and is not hiding any costs. We all realize that the costs should be a little more precise and so does the Department of Housing and Urban Development. New regulations will require that closing costs be spelled out on a revised and consumer-friendly version of the good-faith estimate form that borrowers are supposed to receive within 3 days of applying for a mortgage.
These rules will go into affect January 1st, 2010. The fees are divided into 3 categories:
- Fees that cannot increase from upfront estimates to closing: This includes the lender or broker’s mortgage origination, processing, and underwriting charges as well as lender or broker’s “points” based on the interest rate quoted and local transfer taxes.
- Fees that can increase as much as 10% from upfront estimates: These include services such as appraisals, title insurance, and recording fees from local governments.
- Fees that can increase without limit because the amount is difficult to predict in advance: These include home owners insurance, daily interest charges on the loan, and initial deposits by the borrower into an escrow account.
The new HUD-1 form will allow a clearer picture for the borrower to compare what they were told the fees would be and what they will actually be paying.
