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Fees and prefunding requirements for mortgage closing costs

On Behalf of | Feb 18, 2023 | Real Estate |

Although any real estate sale in Connecticut generally entails closing costs, these expenses increase when the transaction includes a mortgage. Property buyers bear the burden of paying mortgage closing costs. The majority of fees compensate the people who perform various jobs necessary to satisfy lender requirements and complete the transaction. As a result, you can expect closing costs to total several thousand dollars in addition to your down payment.

Third-party costs

A long list of service providers will participate in processing your loan and real estate closing. Some are flat rate fees whereas others are calculated as a percentage of the loan amount. For example, the funding fee for a VA loan is the latter.

Typical closing cost fees include:

  • Loan application
  • Credit report
  • Loan underwriting
  • Survey
  • Real estate commissions
  • HOA transfer
  • Document courier
  • Local government recording fees
  • Title research
  • Lender’s title policy
  • Property appraisal
  • Closing attorney

Buyers of residential real estate near a flood zone will also pay a certified flood inspector. This inspection will determine if the homeowner must pay for additional flood insurance. Some properties require inspections for insect damage or lead paint.

Tax and insurance prefunding

Other amounts listed with your closing costs are for prefunding escrow accounts to pay your upcoming tax and insurance bills. These accounts often need some starter money to ensure that enough money is on hand to pay property tax and homeowners insurance bills as they come in. Depending on the size of these bills, you may need to pay hundreds or perhaps thousands of dollars at closing.

Should you need to buy private mortgage insurance, closing costs could include the first monthly payment. For an FHA mortgage, you must prepare to pay the upfront mortgage insurance premium at closing.