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Closing Costs Reviewed

What are considered closing & settlement costs? 

Lender Fees

These are costs that can include some form of origination or processing fees. They pay for the bank to work on a loan file. Included will be any discount points being used to buy down the interest rate along with the appraisal fee.

Reserves/Escrow Account

Most loans have an “Escrow Account” which collects and holds funds on your behalf to pay for property taxes and homeowner’s insurance premiums when they come due. Not all loans require an escrow account, but the borrower is responsible for paying their property taxes and homeowner’s insurance on time. A special agreement is signed at closing for an escrow account and pro-rated amounts are collected to ensure enough is available by the time these payments are due.

Title Fees

These are fees associated with completing the purchase of your home. Title is often where the Buyers and Sellers sign all the final closing documents to transfer ownership. Title acts as a disinterested third party in the process. They charge to process the final phase of the buying process and disburse closing proceeds accordingly.

Government Fees

In Arizona, typically this fee is a recording fee with the County.

Pre-Paid Items

Every mortgage transaction requires pre-payment of certain costs depending on your loan set up. You will pay pro-rated interest upfront for the loan and your first year of homeowner’s insurance. In addition, if paying upfront mortgage insurance or a funding fee (VA & USDA loans), those costs apply here.

Miscellaneous/Other

If buying a home with a Homeowner’s Association or including a Home Warranty in the purchase of your home, you will include those costs here. This is anything extra that you are purchasing in conjunction with the mortgage loan that must be paid at settlement.