VIDEO: Understanding Closing Costs

Kelly Tribell By Kelly Tribell

Buying a house is a life long investment and can be a little overwhelming when it comes to the loan process. Purchase loans have many parts but one of the most important to understand for the buyer is the closing costs. Kelly Tribell, Partner at Simply Home Lending, explains closing costs and how to make a loan work for you.

Every loan is different, so the first step is to sit down with a Simply Home Lending loan officer to discuss exactly what the buyers needs are. “We focus on your options, show you the numbers, and put it down on paper so it makes sense,” Kelly says. By exploring all the options buyers can understand closing costs and what they are all about.

The most common fees associated with closing costs are:

  • Lender fees
  • Appraisal fees
  • Title company fees (including title insurance)
  • Recording fees paid to the county
  • Transfer taxes paid to the state
  • Prepaid escrow items (property taxes and homeowners insurance)

The fees listed above are all critical to a successful loan closing. The lender fees along with the appraisal fee are all charged by the lender to cover the administrative costs associated with processing the loan file. The title company fees are charged by the title company for title insurance, closing fees, title search, etc. These fees will vary depending on which title company is used for the closing. The recording fees are charged by the county for every mortgage filed at the county courthouse. The transfer taxes are charged by the state for every home purchase transaction that occurs in the state.

Prepaid escrow items are something that most buyers do not realize are included in the money they need to pay at closing. These fees are collected at closing and kept in escrow by the lender to be disbursed at a later date. This means the lender is assuming the responsibility for paying the homeowners insurance and real estate taxes annually. This will ensure the property remains protected with insurance and all real estate taxes are paid. It also relieves the home owner from having to pay these lump sums, and the costs are broken down into monthly installments included in their mortgage payment.

Another aspect of the closing costs not commonly thought of by the borrower is discount points. Discount points can affect the interest rate of the loan depending on the buyers needs. If a buyer is looking to settle down in a home and stay for a long period of time, it might be in their best interest to buy a point or two in order to lower the interest rate on their loan. The lower interest rate will result in a lower monthly payment and lower the amount of total interest paid over the life of the loan.

On the other end of the spectrum, a buyer looking to sell a home within a year or two would want to look into taking a higher interest rate in order to bring less money to closing. This is where the loan officer at Simply Home Lending may issue a credit towards your closing costs, and in return the interest rate on your loan would be higher.

Closing costs at a glance can seem like a lot of fees but when talking to a loan officer, like Kelly Tribell from Simply Home Lending, buyers will feel more at ease and confident they are making a good decision about their life long investment.