If you are like many borrowers facing the need to finance, or refinance a property, you will inevitably ask a lender, a seemingly simple question ”What is your rate?” and follow it up with “What are your closing costs?” This is a slippery slope, be careful. I’d get away from the words closing costs. Why? You are asking the loan officer to accurately estimate Appraisal, Title, Survey, Filing Fees, Applicable taxes, additional real estate fees (sometimes), association fees, and inspection fees. So what happens is sometimes you get a someone who quotes a verbal or written “low ball” estimate who drastically underestimates the (non-lending related) 3rd party fees.
Worse yet, you may go with a lender’s verbal quote of closing costs when the loan officer only told you their lending fees. There are more closing costs involved than just lender fees.
I suggest, instead of asking someone “What are your closing costs?” ask these questions instead:
1) What are the total lender fees for a (conventional, FHA, VA, USDA, OHFA, Jumbo) mortgage
A) Are these fees negotiable?
B) If I only want to pay $XXXX dollars in closing costs what would my rate be? Turn the tables on me, how bout you call the shots. If someone tells you that’s not an option, keep on shopping. Or you can ask them: If I want X % (say 4.5%, for example) on a 30 year fixed right now, how much would your lender fees be? Please note, the only way someone should be able to answer these questions accurately is if you provide them with your credit score, the property type (single family, condo, etc.) the property usage (primary residence, investment property, etc.)*
2) What do you expect the total closing costs to be?
3) How much would I have to come to close with?
4) What charges are paid outside of closing prior to close? You can count on there being an appraisal/ application fee paid up front. Application fees are only to be used towards legitimate 3rd party costs, specifically the appraisal and credit report. If you are going through an approval process and an appraisal has not been done, you should get all but $20 of your deposit returned.
Now that I said all that, what you really need to do is tell them to email you a Fee Itemization worksheet, what used to be called a Good Faith Estimate.

If you would like to know how much you closing costs would be, please provide the information for a custom quote, or contact me to discuss all of your options.

What are the different Ohio closing costs?

Ohio closing costs may include, but aren’t necessarily limited to; lender fees, upfront mortgage insurance premiums (on FHA, and as a conventional PMI option), funding fees (USDA and VA only), the appraisal fee, credit report, various title fees, and county filing fees, a plot survey, general home inspection, pest inspection and real estate fees. This may not be the entire list.

Lender fees may include underwriting, loan origination, discount point(s), processing, tax certification, flood certification, wire fees and funding fees. This is not an exhaustive list of all lender fees. Some lenders may bundle them all into one charge, some lenders may have more fees and call them different things. When it comes to comparisons it is best to look at the bottom line. Mortgage brokers, mortgage bankers, and banks all have different sets of fees. These fees are easily lowered if a borrower is willing to take a higher rate, and increased if you want a lower rate. As far as going ala carte with rates and fees- a usually accurate rule of thumb you can use is this:

Lower your rate by .25% will cost 1 point (1 point = 1% of your loan size, 100k loan = 1k additional)
Lower your closing costs by 1 point (and raise the rate by .25%) this would be the way to get a low cost, or no closing cost loan. Not just no lender fees, but a credit to pay 3^rd party fees as well.

This is just a guide. Rates are determined by bonds yields, and sometimes it is expensive to buy down, or buy up.

Appraisal fees are paid to an appraiser, or an appraisal management company (who in turn keeps a portion of the fee, while the appraiser gets the balance). An appraisal on a residential appraisal will vary from $300 to $750. Higher fees are charged on multi-family (2-4 unit) properties, investment properties, and jumbo loans (loans in excess of 417k).

Credit report fees typically vary from $10- $50. Credit companies can charge for extra services including, trade line updates and rapid rescoring.

Title fees vary significantly depending whether the loan is for a purchase or a refinance. The different title fees include escrow / settlement, closing fees, notary fees, title search, title exam, title binder, owners title insurance, lenders title insurance, endorsements, closing protection coverage, deed prep, doc prep, wire fees, and notary fees.

Filing fees will depend upon specific local and state government schedules. In Ohio you will be limited to county deed and mortgage filing. Filing fees in Ohio are typically between $125 and $225. The cost varies based upon the number of pages in your mortgage document.

Surveys are needed on purchase transactions and cost approximately $150.

General home inspections are approximately $300 – $400. Pest inspections are typically $100 – $150. General home inspections are generally not required unless an appraiser notes any safety concerns on the appraisal report. Pest inspections are required on VA purchase loans.

Real estate fees for buyers are usually limited to an administration fee which will usually cost around $300. These charges are only incurred on purchase transactions.

The bottom line-Shop around
Borrowers ask for a printed estimate of all closing costs included in the transaction. Most lenders can balance costs and rate to strategize with you. A higher rate with lower closing costs in many cases will save you money if you are planning to move in the foreseeable future. If your loan size is large enough, you will be able to get a mortgage with no closing costs, with the right lender. If you think you have found your last home, it most likely will benefit you to pay more for a lower rate.

Ohio closing costs, who pays what?

All lender fees, appraisal fees, flood certificate, and credit report fees all are typically paid by the Buyer, unless it is written into your contract to have these items paid by the Seller.
Mortgage insurance (if applicable)- Buyer
Escrow /closing $350 – both Buyer and Seller approximately $350 each
Title insurance binder- $100 Buyer
Title exam – $350 typically Seller
Owners title insurance policy $5.75 per $1,000 on the first 150k, and reduced amounts after 150k. Split equally between buyer and seller.
Endorsements to title policy $275 – Buyer
Lenders title policy -$100 – Buyer
Misc. – wire, title update, courier, doc prep -$175 – Buyer
Survey- $155 Buyer
General home inspection fee- $300 Buyer
Real Estate Admin fee- $250 Buyer
County filing fee- approximately $200 Buyer

Financing Ohio closing costs

On purchase loans you can’t literally finance closing costs. But you can make an offer to purchase a home with the seller paying them. It’s pretty much the same thing. FHA loans allow seller contributions up to 6% of your purchase price. Conventional loans allow anywhere from 2% to 6% seller concessions (depending upon down payment and property type) to pay towards a buyers closing costs, pre-paid taxes and insurance escrows, and other settlement charges. For FHA purchase of $70 or more, a 6% seller concession should allow you to come to close with only the mandatory 3.5% down payment.

Heres how it works
For example if you are about to place a bid on a house valued at $100,000 as the list price. You might be thinking about making an offer for the property in the amount of $94,000 since it is common practice to offer under the list price. But instead of placing that lower bid you might what to accept the list price as is on condition the seller pay $6,000 of the value toward your closing costs, your 1% upfront PMI can be paid with the concession as well.
In the case the seller will not accept any amount below $100,000 and you have very good reason to believe the property is valued at $106,000 or more you may be able to add that 6% to the top of the loan giving you a loan in the amount of $106,000 but keep in mind the sales price must now be increase to $106,000 and now include a seller concession of $6,000 and the end result is the same for the seller and you have saved $6,000 out of pocket.

Financing closing costs on a refinance
On refinances, closing costs can be rolled into the new mortgage, provided they fit within the maximum loan amount you qualify for under the terms you have chosen. If there is very little equity or cash roll costs in, you may be able to take a slightly higher rate and do a no closing cost loan.

The bottom line
On purchases, ask for a seller concession, if you want to come to close with less money out of pocket. On refinances, it may be necessary to obtain the appraisal before knowing for certain costs can be rolled in.
If you have any further questions about financing the closing costs on a purchase or refinance loan please do not hesitate to ask me.

Factors which can affect mortgage rates and fees

Pre-paid expenses

Pre-paid expenses include; your initial escrow account (property taxes and homeowners insurance), 1st year home owner’s insurance policy premium, and per diem interest from your closing date to the 1st of the next month.
It is important to understand that escrowing your property taxes and home owners insurance is required on all mortgages that have less than 20% down payment on conventional loans. If you are putting less than 20% down and wish to pay your taxes and home owners insurance on your own, lenders generally charge a one-time closing cost of ¼ point, which is equivalent to your loan amount x .0025% (on a $100,000 loan = $250). The reason for this is that the servicing company (the company you pay your mortgage to) makes money off of your escrow balance. This profit, in essence is built into your agreed mortgage rate. Without the ability to make money off of your escrow account, the lender makes up for it by charging this one-time fee at closing).
It’s noteworthy to know that all FHA and VA loans require you to pay your taxes and insurance within your monthly mortgage payment, regardless of the amount of your down payment.
Collectively, pre-paid expenses will vary based on the following: your property tax rate, the cost of your home owner’s insurance premium, the number of days from closing to the end of the month (pre-paid interest), your loan amount and interest rate, and when your property taxes are next due.
I know what you are thinking. Stop the bleeding, man!
Actually is some good news. But I need to ask you to strap yourself in and concentrate here… The good news is this: Ohio property taxes are in arrears. What does that mean? First you need to know that, in all 88 Ohio counties, taxes are disbursed twice a year. Escrowed property taxes are due, and paid (by the mortgage servicer) around January, and July (each county has their own due date). Sounds easy so far, right? Here it is… what is paid in January is not for taxes owed up to that moment in time. Property taxes being paid to your county in January… are… for… the… first… half (January 1 – June 30), of the prior year. In July, taxes paid are for the second half of the prior year.
So, if someone buys a house on August 15th, 2011, the seller owes the buyer some money. How much? Well, depends on how much the property taxes are. Let’s go with an example of property taxes of $250/ month. In this scenario, taxes just got paid in July 2011, but what they paid for, at that time, was for the tax period from July 1st, 2010 to December 31st, 2010. What that means to the buyer (the good part): the current owner of the house owes the buyer a tax proration at close. The buyer has owned the home, but not yet paid taxes for, January 1, 2011 to August 15th, 2011. The escrow/ closing agent computes the amount due to you, from the seller, down to the penny. In this example, they would owe you $250 x 7.5 months, which would be $1875. I never claimed there would be no math. Furthermore, this means it feels good when you are the buyer, and hurts when you are a seller. Compounding the sellers pain are real estate commissions, transfer taxes, a title exam, half of your owner’s title insurance policy, possibly a seller concession to pay for your closing costs, water bill hold back, and other closing fees.

Here are the pre-paid expenses:
Interim interest: If you close on the 15th, you will not have a house payment due on September 1st (15 days after close). Your first payment is due on October 1st . Hey, look at that, some more good news! Since you are getting a 30 year loan, or a 15, or a 10… The loan term is not 30 years and 15 days, it’s for 30 years. You are borrowing money for 15 days, and the cost for that = loan amount x your interest rate/ 365 (days) to create a per diem. For illustration, let’s assume the loan is $150,000, and the mortgage rate is 4.5%. 150,000 x .045 / 365 = $18.49 per day. Your loan costs you about $18.45 per day in the beginning.
Building the escrow account for property taxes: If you close on August 15, you will need to establish an escrow account so that there is enough money in the account to pay for taxes in January, as well as build an account so there are sufficient funds to pay your annual home owner’s insurance premium next August 15th. How is that amount determined? If your taxes are due January 1st, the lender will require you to have enough money in the escrow to pay the tax bill (in our example of $250 a month). The lender will require there to be $250 x 6 (months) plus a 1-2 month pad on January 1. Let’s assume 8 months x 250 = $2000. By making your regular mortgage payments in Oct, November, December, and January, you will need to establish tax escrows with $1000 ($250 x 4 months).
Building the escrow account for home owners insurance: You will need to establish the escrow account with 2 months home owners insurance, so there will be sufficient funds in the account to pay for next year’s policy premium, when it comes due. Let’s assume your home owner insurance is $50/ month. You will need to put another $100 into escrow to account for this future bill.
Home owner’s insurance premiums are paid one year up front. This can be paid prior to closing or at closing. Home owners is paid ahead of time, and taxes in arrears. Why is it paid ahead? Well, that’s the way it’s done. A more thoughtful answer would be: Because you don’t burn your house down and then decide to pay your premium. The policy is only in force if you have made your payment.
In terms of pre-paid expenses, here’s what happens when you buy a house in Ohio:
Using my example started above you would be receiving a seller tax proration of $1875. From that comes ($1000) for tax escrow, ($100) for home owners escrow, ($600) for 1st year home owners premium, and per diem interest $18.49 x 15 (days) = ($277.39), for a grand total of $1977.39 in prepaid expenses. The escrow agent will subtract out the tax proration the seller owes you and your pre-paid net costs are $102.39. All of that writing to just let you know that it is that close to a wash.
For those (who are still reading) that didn’t get any of this, no worries, it took me a couple hours to wrap my head around this, a long time ago. Please call me at (440) 666-6069 or email me with any questions.