There's two types of closing costs- those associated with the purchase of the home, and those related to the procurement of your loan.
Closing costs related to the purchase include an owner's title policy, transfer taxes for city and/or county, escrow fees (for the escrow company who is enforcing the contract as it's written) notary fees and some doc prep fees, inspection report fees (such as pest, property ID report ... It is all negotiable on who pays these fees and is defined in your CA residential purchase agreement that you signed when you made an offer on the house. There are some more common requests made, but again, all of those fees are negotiable as to who's paying what. On bank owned properties we commonly will ask the seller to pay for them as they railroad us to use their title/escrow company anyway (that's another discussion) but if you're buying from a seller or a short sale, you may be asked to pay a few of these. Fees are based as a % of your purchase price when calculating title/escrow fees. A realtor can give you a buyer's net sheet to project these costs if you are looking at paying any.
The closing costs related to obtaining the loan are traditionally the buyer's fees. Those are what is reflected in a good faith estimate. The fees Janet is referring to are those related to the loan. Elizabeth is referring to both sets of fees. But there are fees such as a title policy (this one for the lender, not the owner), escrow fee again (to execute your lender contract), notary, doc prep, loan commissions, etc. that generally cost you about 3% of your purchase price in loan fees. These also include costs for prepayments of insurance and taxes that may be due in the future, but the bank wants a 'reserve account. (These are referred to as recurring fees. ) So within the costs for the loan are recurring and nonrecurring (one time) fees.
In some cases, in this market, we are requesting a seller credit of 3% towards your closing costs and that covers these costs.
Your realtor will help advise you for costs for both the purchase and your loan and how to structure that within your negotiations with a seller.
Hope that helps!
The problem with a good faith estimate is that it's not required to be accurate. You can go to 3 different lenders and get 3 totally different GFEs. If you want a ballpark figure, you'd do better to calculate 3% of the sales price. You can also ask an escrow company for an estimate, based on your GFEs.
Fees that are paid once and never again are called non-recurring. These fees are one-time charges for such items as:
Escrow or closing
Courier / Delivery
State, County or City Transfer Taxes
Home Protection Plans
Natural Hazard Disclosures
Lender fees paid in conjunction with the loan on the HUD-1, line 800.
Recurring fees are those charges that you will pay again and again. They include such fees as:
Fire Insurance Premium
Flood Insurance (if required in your area)
Mutual or Private Mortgage Insurance Premiums (for less than 20% down)
Generally when you apply for a mortgage, your mortgage broker should provide you in writing with what is called a "good faith estimate", it is important to have this "good faith estimate" which details all of your expenses for the Closing (Closing costs). It consists of the many estimated fees that a buyer pays at closing including but not limited to most of the following:
Prepaid Real Estate Taxes
Origination fees i
Fees for the title search
Survey & Plot Plan
Municipal lien certificateRrecording fees
Overnight & courier fees
When you apply for a mortgage their is usually an Appplication Fee, at that time you should have your mortgage broker itemize what that fee covers as well ( ie appraisal & credit report) to ensure you are not charged again at closing for those items)
So, It is always wise to get the "Good Faith Estimate of Closing Costs" initially when you apply, then again in writing following your application to ensure you a fully aware of your costs for closing. And don't hesitate to ask questions about your loan and shop around for the best rates and cheapest closing costs by a reputable bank /mortgage broker. Also a good question to ask is if their are any pre-payment penalties should you decide to pay off your mortggage or refinanace a few years down the road.
Janet Danner, Realtor ERA Belsito & Associates