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Settlement Costs
Understanding Settlement Costs
Closing Costs + Pre-Paids = Settlement Costs
Settlement costs are separated into two groups of costs. First, closing costs are those expenses/costs that are paid only one time at closing. Pre-paids are recurring and are paid throughout the life of the loan.
Settlement Costs include the following fees:
- Closing Costs:
- Appraisal
- Title Insurance
- Credit Report
- Endorsements
- Tax Service Fee
- Notary Fee
- Underwriting Fee
- PA Transfer Fee (Purchase Only)
- Commitment Fee
- Recording Fee
- Flood Certification
- Pre-Paids:
- Interest paid to the end of the month of Closing
- Homeowner's Insurance Initial Policy
- Tax Escrows
- Insurance Escrows
Example of Closing Costs
Below is an example of closing costs for the purchase of a home selling for $250,000. Real Estate Taxes are $2,750:
- Closing Costs:
- Appraisal - $275.00
- Title Insurance - $1,608.75
- Credit Report - $18.40
- Endorsements - $150 (3 x $50.00)
- Tax Service Fee- $75.00
- Notary Fee - $25.00
- Underwriting Fee- $200.00
- PA Transfer Tax - $2,500,00
- Commitment Fee- $300.00
- Recording Fee - $160.00
- Flood Certification - $25.00
Total Closing Costs: $5,337.15
Prepaid Expenses: following the same example as above. The loan amount is $200,000 with an Interest Rate of 6.5% on a 30 Year Fixed Rate mortgage.
- Prepaid Expenses:
- 12 months of taxes - $2,750.00*
- 10 days of interest - $361.11
- Insurance Premium 1st Year - $605.00
- 2 months of homeowners insurance - $108.33
*12 months of taxes is a combination of the escrows required to pay future tax bills plus, pro-rated taxes back to the seller for current taxes already paid by them in the current year.
Total Prepaids: $3,869.44
Total Settlement Costs in the above example are:
Closing Cost Total: - $5,337.15
Prepaid Expenses: - $3,869.44
Total Settlement Costs: - $9,206.59
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