When someone gets a loan (mortgage), whether it is a home purchase or a refinance, there are closing costs involved in the transaction.  Even “no cost” loans have closing costs associated with them, but they are not evident because the costs are paid by the lender.  But every transaction has fees associated with it in four main categories. 

These categories are standardized by HUD and identified by number throughout the industry as follows:

• 800 – Items Payable in Connection with Loan
• 1100 – Title Charges
• 1200 – Government Recording & Transfer Charges
• 1300 – Additional Settlement Charges

It is recommended that borrowers always ask the lender for a Good Faith Estimate which will outline these fees by category, and to go over that estimate in detail.

Fees that are included in the 800 series are lender and third party vendor fees such as loan origination or discount fees, processing, underwriting and wire transfer fees, appraisal, credit report, and tax service fee.  These fees may vary slightly from lender to lender, with the major difference most likely being whether the lender is charging points or not. 

The 1100 series fees come from the title companies and are things such as escrow fees, document preparation, notary fees, and title insurance.  If it is a purchase transaction, there will be title insurance for the property and a lender’s policy.  If it is a refinance, there will only be fees for a lender’s policy.  These fees vary slightly from title company to title company.

The 1200 series fees are for recording fees and any city/county transfer tax.  These vary depending on where the property is located.

While fees associated with the 1300 series are not often included in a Good Faith Estimate because they will not be known at the time of providing the initial GFE, they may, in fact, be a part of the transaction at closing.  These fees may include such things as the pest inspection.

One of the grievances of borrowers is finding out that they have to bring in more money than they thought they would, or getting less back in the case of a cash-out refinance, at the end of the transaction.  This is largely due to the prepaid interest, hazard insurance and/or mortgage insurance (shown in the 900 and/or 1000 sections) that are not really fees, but are dollars needed to finalize the loan.  If an escrow or impound account is being established for the loan, the borrower will be required to fund that account at the close of escrow which can also increase the money needed.  Although the dollars shown in this section are not really “closing costs,” it is important that the borrower has a clear picture of the total funds needed to close the transaction.