To get you started and prepared for your mortgage acquisition, we have provided important information to make applying for your mortgage much easier. The following information is meant to eliminate much of the confusion sometimes present as closing time draws near. For more information regarding our mortgage programs, please contact a Loan Officer or call 773.761.4300.
 

Types of closing costs

There are two broad categories of extra charges and fees that are usually found in settlement of closing transactions nationwide.

1. Charges for establishment and transfer of title. These involve the title search, title insurance, legal fees, and settlement supervision fees.
2. Cost associated with obtaining the mortgage. Other costs include: survey, appraisal, credit checks, loan documentation fees, notary charges, loan origination fees, commitment fees, processing fees, hazard insurance, interest prepayments, Lender's inspection fees and underwriting fees.

Title: who owns what?

In buying a car, you see the Owner's registration certification as proof of ownership or clear title. The burden of proof is upon them.

When you go to buy a house, the burden to provide clear title is usually the responsibility of the Seller. The Lender will not give you a mortgage until you prove that the present Owner of the house legally owns it.

Title Insurance

It is likely that a title insurance policy will be required even though a formal title search was done. This is to guard against the possibility of error by whoever searched the title on the home. Errors in this area are pretty rare, but when they do occur, they are catastrophic for all parties concerned. The cost of this policy is a function of the property value and is often borne by you, the Buyer. You have the right to ask the Seller to pay half or all of the one-time premium cost as part of your negotiations. The title insurance policy lists the Lender as the beneficiary. You would need to take out an Owner's title insurance policy to protect yourself. The additional premium cost will usually be only a fraction of the Lender's policy and is worth it for peace-of-mind.

Related Closing Costs

Another major category of closing cost involves mortgage money. Below is a list of what is included in mortgage money.

• Loan Application Fee
  This fee covers the initial cost of processing your loan request, checking your credit history and preparing the loan documents. The existence and amount of this fee is not refundable even if the loan is not granted. Be sure to ask a Loan Officer for details.
• Property Appraisal Fee
  All Lenders require an opinion, usually by a Lender approved independent appraiser of the market value of the home being purchased. This opinion gives the Lender some confidence that if the Borrower defaults, the Lender can recover its loan money from the sale of the home after foreclosure.
• Loan Origination Fees (1% to 3% of the loan amount)
  Also known as points; each point is equaled to 1% of the mortgage amount which is typically charged to lower the interest rate. It represents the equivalent of prepaid interest.
• Mortgage Insurance (0.50% to 2% of the loan amount)
  The Lender may require you to purchase mortgage insurance as a condition of granting the loan. The most common reason for this insurance is because the Borrower's down payment is less than the Lender's normal minimum (usually at least 20%). It protects the Lender from loss if the Borrower defaults, but it may allow the Borrower to be approved for a loan which they may otherwise not.