The Closing Process in Central Texas: What You Need to Know

Are you ready to take the next step in becoming a homeowner in Central Texas? The closing process, also known as the settlement, is an important part of the journey to owning your dream home. During the closing process, ownership of the property is transferred from the seller to the buyer.

However, this process can be overwhelming, with numerous documents to sign and closing costs to pay. It's essential to be aware of the various fees and costs associated with closing, which may include mortgage-related fees, government-imposed fees, and other miscellaneous costs.

As you prepare to close on your Central Texas dream home, it's important to understand the various fees and costs that may be involved in the process. Here is a list of common closing costs that you may encounter:

1. Loan?Underwriting or Administration?Fee: This fee covers the lender's costs for underwriting your mortgage loan. Not all lenders charge an Underwriting Fee, using a mortgage broker will help you locate lenders with lower upfront fees.
2. Loan Processing Fee: The loan processing fee covers the lender's costs for evaluating the loan application, including the borrower's credit and financial history, ordering appraisals and title reports, and preparing and reviewing loan documents. The loan processing fee is typically a one-time fee that is paid at closing, but it may also be charged as an upfront fee before the loan application is approved. The exact amount of the loan processing fee can vary depending on the lender and the specific terms of the loan. Some lenders do not charge a Loan Processing Fee and a Mortgage Broker can help you identify what lenders are the best for your scenario.
3. Loan Discount: If you choose to pay points to lower your interest rate, you will be charged a one-time fee?known as Discount Points. Each point equals one percent of the total loan amount. In some cases, you can choose a higher rate and receive a rebate to reduce closing costs, this is known as Premium Pricing. Premium Pricing credits never have to be repaid.
4. Appraisal Fee: This fee covers the cost of a professional appraisal of the property, which is often required by the lender?and will be completed by a third party who has no interest in the transaction.?Appraisal fees cannot be collected until mortgage lender Loan Estimates have been signed and are commonly collected upfront before the appraisal order will be placed.
5. Credit Report Fee: This fee pays for the credit report requested by the lender as part of the loan approval process.
6. Title Insurance Fees: These fees typically include costs for the title search, title examination, title insurance, and other miscellaneous title-related expenses.
7. Mortgage Insurance Premium: If using a Government Insured mortgage, VA, FHA, USDA, or making a low down payment on your home, you may be required to pay mortgage insurance to protect the lender in case of default. This premium can typically be removed once you have built up 20% equity in your home?with a conforming, or "Conventional", mortgage loan.
8. Prepaid Interest Fee: This fee covers the interest on your mortgage from the date of closing to the date of your first mortgage payment.
9. Escrow Account: In?some scenarios, a mortgage lender may?require an?escrow account to hold funds for future property taxes and home insurance payments.?An initial deposit is made into an Escrow Account to cover the initial Home Owners Insurance premium?PLUS?up to 3 months of property tax and insurance premiums. Escrow accounts are calculated as part of closing costs, which are not immediate expenses but prepayments for later expenses that will be paid on your behalf.
10. Recording Fees: These fees are charged to record the purchase documents and transfer ownership of the property?with the County Clerk's Office.

It's essential to consult with a local real estate professional to fully understand the closing costs that you may be responsible for when purchasing a new home. These costs can vary depending on your location, and it's important to have a clear understanding of which fees you can expect to pay and how much they will be.

Remember, you have the option to negotiate these costs with the seller during the offering stage. In some cases, the seller may agree to cover all of the settlement costs. Don't be afraid to ask questions and seek clarification on any fees that you don't understand - it's better to be well-informed and prepared for the closing process. Get your closing cost estimate by reaching out to our amazing team at 1781 Mortgage.

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