Learn about the LE & CD

LE / CD Walkthrough: Explaining Closing Costs

Closing your home should be exciting, and once you understand the process and how it works, it can be.
Here you will find a list of costs commonly associated with closing on a home. Fees may vary depending on where you live, so be sure to talk to your lender, real estate agent, or Nations representative specific information.
All closing costs must be listed on your LE / CD settlement form, a document that is required to be filled out prior to finalizing the purchase of your home.

What are My Closing Costs?

In addition to the sales price of the home, there are a variety of costs associated with finalizing the transaction. Click on any of these links below for more information on these costs:

Real Estate Broker Commission/Fees
Items Required by the Lender to be paid in advance (a/k/a “Prepaids”)
Escrows/Impounds/Reserves
Title and Closing Charges
Recording/Government Filing Fees
Other, Miscellaneous Charges

Real Estate Broker Commission/Fees

If you use a real estate agent to help you in buying your home, the cost of the agent’s services can be paid in one of two ways. Generally, the seller pays for all agents in a transaction in an amount usually stated as a percentage of the sales price. While this amount will be deducted, along with other seller-paid closing costs, from any amount the seller might otherwise be paid and is usually stated on the LE / CD, this will not be your charge. Increasingly, buyers in some places are engaging their own so-called “buyer’s broker or agent.” How they are paid and by whom varies from place to place and can be negotiated in many cases. Sellers frequently also pay for such services on behalf of buyers but if a charge is paid by the buyer, it will also be stated on the LE / CD and added to the amount you’ll need to bring to closing.
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Items Required by the Lender to be paid in advance

There are certain items the lender may require you to pay at the time of closing or in advance of the actual closing date. These could include:
Interest – Lenders usually require payment of loan interest from and including the day of closing through the end of the month of closing. After that, interest is accrued and paid as part of the monthly loan installments.
Mortgage Insurance Premium – At the settlement, you may be required to pay your first year’s mortgage insurance premium, or a lump sum premium that covers the life of the loan. This fee is payable to a Private Mortgage Insurance Company. If the loan is being federally insured (FHA) or guaranteed (VA), the mortgage insurance or funding fees for those government loan programs would be charged here.
Hazard Insurance Premium – Oftentimes lenders require payment of one year’s hazard insurance, commonly referred to as homeowner’s insurance, against fire, windstorms and natural hazards. In order to bind the coverage, the premium is often paid in advance of closing.
Flood Insurance – Depending on the location of your home, flood insurance may be required and payment of the first year’s premium must be made in advance of closing.
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Escrows/Impounds/Reserves

Although the lender isn’t required to provide an estimate of the reserves they will be collecting, it is important that you be aware of whether the lender will or will not be “escrowing” for taxes, mortgage insurance (if any), hazard and flood insurance. The use of an escrow/impound account to build up the funds needed to pay these items as they become due can often be a good way for borrowers to budget rather than having to pay these large sums out-of-pocket when they come due. Be sure to ask your lender in advance of closing how these items will be paid on a go-forward basis.
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Title and Closing Charges

These fees cover the administrative costs of a title search, title examination, issuance of the title commitment/binder and final title insurance policy(ies.) Also included would be charges for conducting the closing/settlement/escrow. You are free to select the title company to conduct your closing/settlement/escrow, so let your realtor and/or loan officer know you prefer to use Nations.
Settlement/Closing Fee – A fee must be paid to a settlement agent who has prepared documents, calculated figures, and oversees proper execution of closing documents. This fee is often split between buyer and seller but can be negotiated as part of the sales contract.
Abstract of Title, Search, Title Examination, Title Insurance Commitment or Binder – In order to ensure that there are no pre-existing problems with your property, a title insurance professional must perform a title search and produce documentation on the home’s title. In some places, one or more of these charges will appear separately on the LE / CD and in other places they may be included within the title insurance premium. When a mortgage loan is involved, there may also be added charges for special endorsements that will accompany the lender’s title policy.
Document Preparation – Some settlement agents charge for the cost of preparing legal papers such as the mortgage, deed of trust, note or deed and/or other loan and title documentation. If a lender charges a document preparation fee, it will typically appear in the Loan Fees/Direct Loan Costs section of the LE / CD.
Notary Fee – Because there are legal documents involved, a licensed notary is required to acknowledge the fact that the proper people signed these official documents in their presence. Notaries often charge a fee for their services.
Attorney Fees – Both the home buyer and the seller might have their own legal representation to prepare and record legal documents. Frequently, however, where an attorney is acting as a settlement agent, there may only be one involved in the closing. Who pays for those services is a matter of contract negotiation but is often handled like fees paid to any other settlement agent/title agent.
Title Insurance – There are two kinds of title insurance policies: Loan and Owner’s policies. The cost for the Loan Policy is based on the loan amount and the cost for the Owner’s Policy is based on the sales price of the home. Who pays these one-time fees at closing varies from state to state. Ask your settlement agent how it is handled in your area. In some circumstances, discounts may be available (such as a “reissue rate” or “reissue credit”) when the property has recently been insured by a title insurer. Be sure to ask if you are entitled to any discounts.
You also have the option of purchasing a policy with expanded coverage. It’s called the Homeowner’s Policy and it covers more things than the Owner’s Policy. Ask your Nations representative for an explanation of the expanded Homeowner’s Policy so you can decide which policy is the best one for you.
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Recording/Government Filing Fees

Buying a home is not only a big investment, it is also a matter of public record. The property information and the loan information are required to be filed at the county courthouse or other local government recording office.
Recording Fees – The recording fee is paid to a government body which enters an official record of the change of ownership.
Transfer Taxes, Document or Transaction Stamps – These are government charges based on the amount of the mortgage and, often, also on the purchase price. Depending on your location, there could be a city, county or state tax involved, or some combination.
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Other, Miscellaneous Charges

Survey Fee – Lenders and title insurers often require a surveyor to conduct a survey of your property to define the property size and boundaries and to see if any part of the building or other improvements are “encroaching” on a neighbor’s yard — or the other way around. They are also looking to see if there are any setback violations or other material matters that are considered problematic.
Inspection Fees – When homes are sold an inspection is often recommended and in some cases the contract may even be contingent upon an acceptable inspection report. This fee covers the cost of an inspector to check the dwelling for any structural problems or issues. Frequently, this is a sales contract term imposed by the home buyer to obtain an accurate assessment of the condition of the property. The work is done prior to closing but the fee is often collected at closing. There are several inspections that a future homeowner might want to request and a lender might require. These could include pest inspections (termites and other wood-destroying organisms), lead paint inspections (for structures built before 1978), roof inspections, water/well certifications, structural or mechanical inspections, or additional specific inspections based on the property type and location.
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