Closing Costs
What are they? Understanding closing costs is an important part of avoid
ing surprises during your transaction.
Closing costs are paid by both the Buyer and the Seller at the settlement of the transaction. The Seller will pay fees associated with selling the home, and the Buyer will pay the fees associated with purchasing the home. Typical Buyer associated fees are listed below. The good news is that average closing costs in Tennessee are lower than in other states. We happily provide our clients with Estimated Nets, but always check with your Lender for the most accurate estimate of your closings costs and escrows.
Appraisal Fee
Buyer cost. The appraisal is ordered by the Lender to determine fair market value of the home. The Appraiser goes to the property to measure and assess and then compares it to similar homes in the neighborhood that have recently sold. The fee is sometimes charged at time of loan application but is usually charged at closing.
City or County Transfer Tax
Buyer cost. Taxes charged when a property transfers ownership. Similar to a sales tax.
County Property Taxes
Buyer & Seller costs. Annual taxes home owners pay for the ownership of property. In Tennessee, we pay taxes in arrears, which means taxes are prorated at closing and often result in a credit from the Seller. If you will have an escrow account, several months’ worth of taxes may be collected from you to deposit in your account. If you don’t have an escrow account, taxes are billed in October and due no later than the end of February the following year.
Courier Fee
Buyer & Seller cost. Paid to a courier for delivery of documents from the Lender or to express payoff of an existing loan on the property.
Credit Report
Buyer cost. Your Lender will pull your credit several times throughout the loan process to check your credit history. **Do not make any major purchases or change your credit/employment status before closing.**
Flood Certification Fee
Buyer cost. Paid for a flood certification, which states whether or not the property is located in a flood zone. If it is in a flood zone, your Lender will require flood insurance.
Hazard Insurance (Homeowners Insurance)
Buyer cost. Your Lender might require the entire first year’s premium upfront. If you will have an escrow account, at least 2 additional months will be collected at closing to deposit in the account.
HOA Transfer Fees
Buyer cost. Charged by Home Owner Association management companies to transfer documents and disclosures.
Interest to the End of the Month
Buyer cost. Lenders charge interest from the date the loan is funded until the first day of the following month.
Inspection Fee
Buyer cost. This fee is charged for inspection of a property after appraisal. It is usually done if you are buying new construction and the Lender wants to be assured that the house is completed.
Mortgage Insurance Premium
Buyer cost. Private mortgage insurance (PMI) may be required on certain loans, generally if you are putting less than 20% down.
Origination Fee
Buyer cost. A fee charged by the Lender for making a mortgage on the property. This fee is usually computed as a percentage of the loan amount.
Pest Inspection
Buyer cost. Fee charged for a termite inspection of the property. The may be POC (paid outside closing).
Points
Buyer cost. Also known as discount points. A onetime fee charged by the Lender to lower the interest rate normally charged. Each point is equal to 1% of the mortgage amount.
Processing Fee
Buyer cost. Fee charged to pay for the processing of the paperwork for your loan.
Recording Fees
Buyer cost. Fees paid to your county which records documentation of your legal ownership of the property, such as deed, mortgage, note, etc.
Settlement or Closing Fee
Buyer and Seller cost. A fee paid to the title company for handling all financial transfers and payments associated with the closing.
Tax Service Fee
Buyer cost. A fee charged for researching county tax records to confirm that the taxes are paid in full and up-to-date.
Title Insurance
Buyer or Seller cost. Guarantees that your property has no other lien or claims against it. Your Lender requires that you purchase title insurance. In Middle Tennessee, the Seller usually pays for clear title, but everything’s negotiable.
Underwriting Fee
Buyer cost. The Lender fee for reviewing your loan application for approval.
Wire Transfer Fee
Buyer cost. When you purchase or refinance, funds will be wired to fund the transaction. The receiving account charges a fee for the wire transfer.