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)
- and reserve (or escrow) funds for property taxes and homeowners insurance.


Estimates of Settlement Costs
At various points in your loan application process, you are entitled to get estimates of the costs and fees associated with getting a mortgage and going through settlement.

The “good faith estimate”
With such a long list of potential charges at settlement, it is important to know what to expect. The Real Estate Settlement Procedures Act (RESPA) requires your mortgage lender to give you a “good faith estimate” of all your closing costs within 3 business days of submitting your application for a loan, whether you are purchasing or refinancing the home. This is a good faith estimate, but the actual expenses at closing may be somewhat different. If you are purchasing the home, you will also get an information booklet, Buying Your Home: Settlement Costs and Helpful Information.

Truth in lending information
For home purchases, the lender is required, under the Truth in Lending Act, to provide a statement containing “good faith estimates” of the costs of the loan within 3 business days of submitting your application. This estimate will include your total finance charge and the annual percentage rate (APR). The APR expresses the cost of your loan as an annual rate. This rate is likely to be higher than the stated contract interest rate on your mortgage because it takes into account discount points, mortgage insurance, and certain other fees that add to the cost of your loan. When refinancing your mortgage, you will receive the truth in lending disclosures before you settle.

The “HUD-1” statement
When you purchase a home or refinance your mortgage, the Real Estate Settlement Procedures Act also requires the lender to give you a copy of the HUD-1 or HUD-1A Settlement Statement 1 day before you go to settlement, if you request it. This final statement of settlement costs will show all the fees and charges you will be expected to pay at settlement.

Fees paid outside of settlement
Some fees may be listed on the HUD-1 and marked as “Paid Outside of Closing” (or “POC”). You will pay some of these fees, such as for credit reports and appraisals, before settlement. Other fees, such as those to a mortgage broker, you will pay at settlement.