There are two different categories of closing costs. Recurring Closing Costs, also called Pre-Paid Items, and Non-Recurring Closing Costs, NRCCs:
1) Per-Paid Items – These are costs that are associated with the maintenance of your loan and of your property that are regular recurring costs that you pay monthly or annually. These costs include normal interest due on your loan, property taxes that you pay twice a year or monthly in the case of a loan amount greater than 80% of the purchase price/value of the property, and insurance whether Home Owner’s Insurance/Fire Insurance/Hazard Insurance (three terms for the same exact thing) or Private Mortgage Insurance (PMI). In the case of a 3.5% down FHA program, you will have to setup an Escrow/Impound Account (both terms for the same exact thing in California) with the new lender/servicer so you can pay you monthly property taxes and hazard insurance as part of your monthly mortgage payment.
a. You can estimate between 4 and 10 months of property taxes and 2-3 months of fire insurance impounded at closing to setup the escrow account. That is your money that sits in the escrow account accruing negligible interest and that money grows each month until it pays your property taxes that are due twice a year and your fire insurance premium that is due once a year. There will always be at least 2 months property taxes and 2-3 months fire insurance sitting in the escrow account at all time.
b. You will pay a 12 month fire insurance premium at closing in addition to the monies impounded into the escrow account.
c. You will pay the lender an amount of mortgage interest equal to the number of days left in the month in which you close and then your first mortgage payment will be due the 1st day of the 2nd month following the date of closing. Your mortgage payments will always pay the prior month’s interest so you will likely not have a mortgage payment due the 1st day of the 1st month after the closing date because there will be no full month’s prior interest for such a payment to cover. That is why we take the interest for the month in which you close through the closing.
2) NRCCs –
a. The apples to apples comparison of me to anyone else is in the rate and point combination I can secure on any given day in the market and a $1000 Underwriting Fee to the lender we close the loan with. I do not charge any Application, Administrative, or Processing fees. I don’t even charge for the credit report. With the lenders I work with in University Hills, I am getting paid a 1.5% + $700 flat fee from the lender. That is absorbed into the rate and point combinations I can secure. You will not pay that in addition to any of the other closing costs because the lender pays our commission.
b. Title and Escrow fees are the same no matter who you choose for the loan. Those fees are quoted by the escrow company that ICHA uses for these transactions in University Hills. The cost in these fees is dependent on the purchase price and loan amount. You could estimate roughly $5K-$6K for these fees. We won’t know exactly how much the title/escrow fees will be
c. Any ICHA costs which are usually less than $1000. These are also a wash since the lender doesn’t control these costs.
d. Appraisal Fee which is around $500 no matter which lender you work with and I work with.