Settlement companies and others conducting the settlement

Settlements are conducted by title insurance companies, real estate brokers, lending institutions, escrow companies, or attorneys. In most cases, the settlement agent is providing a service to the lender, and you may be required to pay for these services. You can also hire your own attorney to represent you at all stages of the transaction, including settlement.

You may be involved in some of the closing activities and not in others, depending on local practices and on the professionals with whom you are working. In some regions, all the people involved in the sale--the buyer; the seller; the lender; the real estate agents; attorneys for the buyer, seller, and lender; and representatives from the title firm--may meet to sign forms and transfer funds. In other regions, settlement is handled by a title or escrow firm that collects all the funding, paperwork, and signatures and makes the necessary disbursements. The firm delivers the check to the seller and the house keys to you.

Costs for settlement services vary widely, depending on the professional services involved. Regardless of the way settlement is handled in your region, shop around and ask for information on all services provided and all fees charged.

Amounts Paid to State and Local Governments

In some parts of the country transfer and recording fees are low. In other parts of the country costs of transfer fees, recording fees, and property taxes collected by local and state governments may be as much as 1.25% of the loan amount. Some of these fees, such as the recording fee and transfer fee, are one-time fees. Although there is no way to avoid paying these fees and taxes, you may be able to negotiate with the seller to pay some of these costs. But remember, you must include these terms as part of the purchase offer for the property.

Amounts for property taxes may go into an escrow account. The amount you will need depends on when property taxes are due and the timing of the settlement. The lender should be able to give you an approximation of these costs at the time you apply for the mortgage.

“All-in-One” Pricing of Settlement Costs

Some lenders have bundled most of their settlement costs into a single price. Generally, they combine the following fees:

• application
• origination
• underwriting and processing
• points
• pest inspection
• appraisal
• credit reports
• lender’s attorney
• flood certification
• title search and title insurance
• recording and fees for other tax services

This all-in-one price, however, does not include all of the fees needed at settlement. You will also need funds for the following:

• prepaid interest (based on the day of the month you settle)
• mortgage and transfer taxes (determined by your state or local taxing agency)
• private mortgage insurance (if needed)
• homeowners (hazard) insurance
• flood insurance (if needed)
• reserve (or escrow) funds for property taxes and homeowners insurance.