Mortgage loans are generally closed by a third party called a closing agent whose function is to coordinate and distribute all paperwork and funds according to instructions mutually agreed upon by the buyer and the seller. As a result, the closing process on a home mortgage involves settlement of all conditions of the sale and collection and disbursal of all funds on behalf of both buyer and seller.
The closing agent ensures that the instructions of all parties and the lender are fulfilled and that ownership of the property is transferred properly from the seller to the purchaser. A nominal fee, based on the purchase price of the property, is charged by the agent's company to perform this service.
In the State of Georgia, the closing agent must be an attorney who represents the lender. Closing a real estate transaction requires a tremendous amount of technical knowledge and practical experience. This is why loans are closed by an attorney. The closing agent does the following:
Please note: Payment of the closing agent's fees can vary based on several things—the terms of purchase and sales agreements and the permits of some specific loan types
Down Payment - The difference between the total sales price and the new loan amount due in cash at closing.
Origination Fee - A fee paid to the lender in order to originate the loan.
Discount Points - A percentage of the loan amount which may be required by the lender. Discount points fluctuate, depending on the availability of mortgage money and the current interest rate. Discount points may be paid by either the buyer or the seller.
Credit Report Fee - A charge to obtain a financial background report on the borrower.
Attorneys Fee - Charged by the closing attorney for preparation of all closing documents, disbursal of funds and handling the actual closing itself.
Owner's Title Insurance Policy Fee - Provides the buyer with title insurance, insuring that no one will come forward with a better claim to the title of the property than the buyer. It is a one-time fee that covers the buyer as long as he owns the property and beyond. When issued simultaneously with the lender's policy, a reduced rate is given by most title insurers.
Lender's Title Insurance Policy - Provides the lender with title insurance. The fee is based on the loan amount.
Recording Fee - Charged by the County Recorder's Office for recording any closing documents.
Tax Service Fee - Required to assure that all tax billings are paid on the right tax parcel. FHA and VA do not allow the borrower to pay the Tax Service Fee.
Real Estate Brokerage Fee - The amount paid to the real estate firm (usually by the seller), for services rendered to buyer and seller.
Transfer Fee - Also called the Assumption Fee, required on all cash to mortgage transactions. A lender typically charges to transfer the loan from the seller into the buyer's name.
Appraisal Fee - A fee paid to determine the estimated market value of the property. The appraisal is ordered by the lender and is intended to protect the lender's equity in the property.
Pest Inspection - Required on most new loans to determine if there is an active or previous infestation of termites or other pests in the home, generally paid for and provided by the seller.
Assessments - Local improvements on property for sewers or water, generally paid in full on all cash or new loan transactions. May be assumed on seller financed or assumption transactions.
Home Warranty Program - Home Protection Coverage available from various private companies, protecting seller and buyer on major systems and built-in appliances. Most builders pay the fee on new construction.
Home Owners Association Fee - On townhouses, condominiums, some subdivisions, etc. the monthly service assessment fee, usually prorated between the buyer and seller at closing.
Private Mortgage Insurance (PMI) - On conventional loans, an insurance premium charged by a private mortgage insurer that insures the lender against a borrower's non-payment on loan amounts in excess of 80% (loan-to-value) against a borrowers default. This is generally paid monthly by borrower as part of their monthly payment.
Loan-to-Value Ratio - The amount of the loan versus the value of the property (example: an $80,000 loan on a property valued at $100,000 yields an 80% loan-to-value ratio).
Market conditions can vary depending on the supply of homes for sale and the number of people interested in buying a home at any given time. An unbalanced market, either buyers or sellers, may require the negotiation of fees that are traditionally paid by either the buyer or seller, unless set by law, in order to increase marketability or expedite a sale. The closing costs and definitions in this guide are intended for the general information of buyers and sellers. All transactions are different. Some may exclude certain costs, may have costs paid by other parties than those shown and may include closing costs not covered in this guide.