I just did a quick check on one of those National Rate Quote sites that claimed to have the inside “scoop” on Closing Costs in NC. OMG! They said the average closing costs for a home costing $200,000 to $300,000 was $1500 to $3500, or roughly 1.18%.
Then I scrolled down on the page, and they showed the rate quotes… and the points being charged (yes, points are part of closing costs) averaged $1800! Yikes!
That Math doesn’t work! It concerns me that folks who are looking for Mortgage Rates might be seeing these quotes and misunderstand that the $1800 charge is in ADDITION to what we would “normally” quote in NC for Closing Costs.
Builder Mortgage Companies do this on a regular basis too.
Different Kinds of Closing Costs in NC
There are (in my thought process) 2 kinds of Closing Costs. There are the “Hard Closing Cost” fees and charges that are associated with services to obtain the mortgage – and the cost of establishing the Escrow account, which will pay your taxes, Homeowners Insurance, etc. every month (referred to as Pre-Paid items).
The “Hard Closing Cost Fees” include:
- Origination Fees
- Processing Fees
- Underwriting Fees
- Tax Service Fees
- Flood Certification Fees
- Tax Transcript Fees
- Recording Fees
- Appraisal Fees
- Credit Reporting Fees
- Attorney Fees
- Title Insurance Fees
We generally quote mortgage rates in NC with no origination fees, and no points. Most Lenders in NC do have a Lender Fee / Processing Fee or Underwriting Fee. That Fee can be listed as an Origination Fee on your Loan Estimate. This is generally done in NC so that the borrower can write off the charges on your taxes.
In addition to the “Lender Fee,” the Tax Service Fees, Flood Certification Fees and Tax Transcript Fees are normally added together – meaning there’s just one big fee that lumps stuff together. This fee will vary from Lender to Lender, and it is generally NOT connected to your loan amount, meaning it’s a flat fee. It’s not 1% of the mortgage loan. In most of the State, these fees range from $800 to $1200.
Fees to establish and transfer ownership of the property. It might sound silly, but we must have Title Searches done to prove that the seller owns the property you want to buy. This is where title search fees and title insurance fees come into play. In North Carolina, the closing attorney will verify that the seller is, indeed, the owner of the property. They will obtain a title insurance policy to guard the lender against any errors that could have occurred in the searching process. The cost of the policy is based on the loan amount. The Attorney will also charge their fees for performing the closing, courier fees and other (? Miscellaneous) charges involved in the settlement process.
Most Attorney fees being quoted in Raleigh NC right now are between $800 and $1200. Attorney’s in NC now have a closing room for Sellers, and one for Buyers. You no longer see the other party, and if you do, there are surveillance cameras recording the exchanges. There are also cameras outside, and the footage must be kept for several years as evidence. Additionally, there’s a ton of security and encryption required to keep funds safe from hackers – all of those costs are being pushed on Consumers.
We recently reviewed a Loan Estimate from another Lender, here in Raleigh, and they had a charge of $875 for a Survey on a Conventional Loan for a house near North Hills that was built more than 30 years ago. The reason we mention it is because most lenders do not require a Survey.
Sometimes you can obtain a copy of the previous survey from the current owners. You would want one if you are trying to put up a fence, or have a question about expanding a deck or bedroom and are concerned about being too close to the line? But as a rule – we don’t show them on a list of items you need to budget for.
We also don’t disclose the costs for a Home Inspection – which could be $400 to $500. The lender does not require a Home Inspection, but we think it’s a great idea to have one! If you are going to have a home inspection or get a survey – you need to add that to the cost estimate, we provide you.
The same thing is true of the Termite Fee. The important thing to realize is that the vendors providing these services will expect to get paid whether or not your transaction closes, and they may ask that you pay when services are rendered. If the Seller is paying the Closing costs… you need to address these upfront costs with them, at the time the Contract is being negotiated.
Prepaid Closing Costs Fees
Prepaid Closing costs are associated with the monthly fees you pay with your mortgage payment. If you are not Escrowing your taxes and insurance you will still have at least your portion of the taxes, and a years’ worth of Homeowner Coverage due at closing.
Generally speaking, if another party (like the Seller) is paying for all or a portion of Closing Costs – they are not covering Prepaid Items. This is something that you need to specifically negotiate into your contract.
PMI –Mortgage Insurance is really default insurance and is found in Conventional and Government Loans (although it’s called different things). VA Loans have the lowest PMI Rates, since there’s no monthly charge. USDA Home Loans also have a very low PMI Rate – and FHA PMI rates are the highest. This is not an insurance that covers you in the event of death or injury. Most PMI rates are charged as an Upfront Fee (which is generally added to the loan amount) and a monthly fee. You will be required to make a deposit into your Escrow Account of 2 months of the PMI Premium when you close.
Homeowner’s Insurance – Insurance that protects property against loss caused by fire, some natural causes, vandalism, etc., depending on the terms of the policy. Also includes coverage such as personal liability and theft away from home. We will need for you to have the Policy in place by the time of Closing.
Flood Insurance – Although few properties in Piedmont NC require Flood Insurance, then we will need to collect a full year, pus two months at closing to establish your Escrow Account.
Fees to State and Local Governments. These fees include transfer, recording fees at the Court House, and property taxes. Your property taxes are based on the assessed value of the home by the County. Taxes can often be paid as a part of your monthly mortgage payment. In addition to this, if your property is part of a Homeowners Association there might be Association dues which are included in your monthly escrow account. This is where it can get expensive, because you could be charged more than 6 months of taxes for your Escrow account!
Who Can Pay For Closing Costs in NC?
ALL of these fees can be paid by us with a No Closing Cost Mortgage, but you’ll have a higher mortgage rate.
There are ways, and times, when it makes sense for us to pay some of your closing costs… however, on a purchase transaction we will not be “rolling in” closings costs to the mortgage. This term literally refers to borrowing more than just the mortgage costs… while we can add items like the PMI on an FHA, VA or USDA loan – cannot loan you more money in order to cover the attorney fees (for instance).
Having us pay SOME of your Closing Costs usually makes sense! For instance, we generally do not quote our mortgage interest rates with an origination fee. We quote a zero-point, zero origination fee mortgage rate to save you cash out-of-pocket. This means that you have a slightly higher than market mortgage interest rate, and we absorb the cost.
The Seller can obviously pay for all or some of the Closing Costs. In general, this means you will be paying a little more for the home. On dollars of hundreds of thousands of dollars, and extra $4000 added to the cost is not going to change the monthly payment very much. The trick is to be certain the home will appraise at the higher sales price.
If you have questions about Closing Costs for a particular home or price point you are interested in, please call Steve Thorne 919-649-5058 NMLS 60596
Equity Resources, Inc. NMLS 1579, NC L-134393-102
201 Shannon Oaks Circle, Suite 204, Cary NC 27511