Nonrecurring Costs

Points
Points are also called loan origination fees, discount points, or mortgage broker discount points. A point is one percent of the loan amount. The basic theory is "the more points a borrower pays the lower the interest rate." For every ½ point paid the borrower should obtain an interest rate that is 1/8th % lower. It takes a borrower about 4 to 4 ½ years to recoup the cost of the points paid. The recouping of the points comes in the form of lower monthly payments.

A borrower should have the option of paying or not paying points, depending on the particular needs. In some cases, a borrower may need to pay points to qualify for the requested loan amount. This may be due to income considerations or credit report issues.

Example: If a loan is $200,000, 1 point is $2,000 & 2 points are $4,000.

Escrow
Escrow is neutral company that facilitates the closing of purchase and refinance transactions. Escrow officers take instructions from the buyer, the buyer's agent, the seller, the seller's agent, the lender, the title officer, the court, and any other related party. The escrow officer prepares escrow instructions that follows the written purchase contract. They prepare amendments to the escrow instructions that are needed as issues develop. In the case of a refinance, they follow the lender's instructions, title insurance requirements and the borrower's instructions. When all parties have completed their agreed upon duties the escrow can close.

The escrow officer sees that loan documents are signed, title and hazard (fire) insurance is in place, and termite report repairs are completed. They make sure local ordinances are complied with, county and city taxes are paid, 1099's are filed, and homeowners association transfer fees are paid. They will draw certain deeds and verify they did record. At closing, they will disperse funds and commissions to all parties and issue a HUD-1, which is the final closing statement.

Purchase Escrow Fees:

Base Escrow Fees	$200 base charge + $2.00 per $1,000 of the purchase price.
Loan tie-in Fee	$150 to $250
Drawing Documents	$100 per document
Notary Fees	$20 to $50

Refinance Escrow Fees:

Base Escrow Fee	$450 to $550 regardless of loan amount
Drawing Documents	$100 per document
Notary Fees	$50.00

Title
Title insurance provides the buyer and the lender with protection from fraud and misrepresentation. Public record background checks are performed on the seller and buyer to see if there are any judgements, tax liens, court ordered child & spousal support obligations that are superior to a lender's position. The title insurer will look for newly recorded restrictions or uses that may have been added to the property that would affect the use of the property. In the case of larger or unusual shaped properties, a physical inspection might be done to see if there are any encroachments.

The title policy will list the priority of liens, easements, covenants, conditions, restrictions, encumbrances, and trust deeds (loans) against the property. The policy will list the legal description and how the borrower takes title. They are responsible for providing the borrower and the lender with clear title to the property. The title officer will see that prior mortgages and other obligations previously recorded on the property are satisfied before escrow is closed. They are responsible for the actual recording of the deeds in the county recorder's office that will give the buyer and new lender clear title. Without title insurance, a borrower would never get a lender to finance a property.

Purchase Title Charges:
Title charges vary from Northern California to Southern California. In Northern California, it is customary for the buyer to pay the whole title charge. In Southern California, the seller pays the greater percentage but the buyer pays a percentage as well. It is highly advised that you check with your real estate broker, title insurance company or escrow company as to these charges.

The higher the purchase price of the home the more the insurance will be.
Sub Escrow Fee	$75 to $150
Additional Supplements	$100 to $150
Recording Fees	$50 to $100

Refinance Title Charges:

70% short term rate	$600 to $1200 (based on loan size)
Sub Escrow Fee	$75 to $150
Additional Supplements	$100 to $150
Reconveyance Deed	$75 to $100
Recording Fees	$50 to $100

Lender
The funding lender has certain costs associated with their particular operations. Although they will be enumerated at loan application, they do vary in name from lender to lender. The costs run from a low of $450 to a high of $1200 with the average costs of about $900. The lenders that have the cheaper costs generally have the higher interest rates and vice versa. Below is a list of common fees. Again, the fee total is usually $900.

Underwriting Fee	Tax Service Contract
Loan Document Charge	Wire Transfer Fee
Processing Fee	Flood Certification Fee
Administrative Fee	Credit Report Fee

When shopping loans, the borrower should look at a combination of all fees and points to determine the better program. The latest trick employed to confuse the borrower is the use of a Flat Fee. For instance, Ditech.com charges a flat fee of between $3,600 to $4,000 for a no point refinance of $275,000. It should be called a "Fat" Fee as nonrecurring closing costs, if obtained separately, would normally run $2,800 to $3,000.

Appraisal
An appraisal is a current market evaluation of a specific property by a licensed appraiser. Mortgage underwriting is based on the lower of the purchase price or the appraised price. Lenders calculate the Loan-To-Value (LTV) to see if a particular loan request has enough LTV to meet the underwriting guidelines. The LTV is important as it dictates the level of risk that a lender has. LTV's over 80% could require mortgage insurance and have tighter credit standards.

Appraisal Fees:

Single Family Residence Conventional Loan	$275 to $500 (usually $300)
Single Family Non Owner Occupied	$375
FHA or VA Purchase (none on VA Refinance)	$350 (if FHA streamline $275)
Units (2 to 4)	$400 to $600

Miscellaneous Charges

Professional Service Fee is a fee charged by the real estate company on a purchase transaction. It offsets some of their administrative costs. Not all companies charge them. They vary in price but are usually $250.00.

Home Inspection Fee is a fee charged by a licensed home inspector to provide the buyer with a detailed report on the home being purchased. It is used to inform the buyer and negotiate items that the buyer may want the seller to repair. It is a good idea to pick your own. Prices vary from $100 to $350 and usually run $200. This item is not mandatory, but is highly recommended.

Homeowners Association Transfer Fee is a fee charged by the company that manages the homeowners association, if one exists. They provide documentation and may be asked to fill out a certification. They are responsible for collecting the dues for all the homeowners within the association. This fee is set by the management company and is around $250.

Home Protection Policy is an insurance premium that is paid to a company that will insure most home repairs for a period of one year from the date of purchase. The higher the premium paid, the more extensive the coverage. Most of the time the seller will pay this cost. This gives the seller some protection against a lawsuit for items undisclosed. In the event of an "as is" sale, the seller may not want to pay this item. Costs run from $295 to $500. Check the coverage. It is possible some items will not be included. Every time a claim is made, the buyer pays a nominal charge to have a repairperson come to the property.

Upfront Mortgage Insurance Premium
Upfront Mortgage Insurance is required only on FHA loans. The federal regulations dictate from time to time how much the upfront mortgage insurance premium is. It can be financed into the loan. At this time the cost on a 30-year loan is 1½ per cent of the loan amount. This cost is not charged on condominiums. FHA will refund part of the Upfront Mortgage Insurance Premium for a period of 5 years if you payoff or refinance the loan to a conventional loan.

VA Funding Fee
The VA Funding Fee only applies on Veteran's Administration loans and runs 2% of the loan amount for the veteran's first use and 3% for the 2nd use. It can be financed on the loan. For refinances, the funding fee is ½ %. If a veteran receives a service connected disability check, the VA will waive the funding fee.

Recurring Costs             Home

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