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It is very important that you understand what fees will be charged prior to submitting an offer on a home especially for First-Time Home Buyers.

If you are not currently working with a lender, please feel free to contact one of our preferred lenders. Remember, obtaining your loan approval is the first step in buying a home.

As a service to all of my clients, we call your lender to receive a Good Faith Estimate of Closing Costs that represents the property you’d like to purchase. With this information, you are able to decide how you’d like to structure your purchase offer.

Common misunderstandings about closing costs are:

The seller has to pay some or all of your closing costs. TRUTH: Closing costs are a negotiable item in the sales contract. You can ask the seller to pay your closing costs, but the seller does not have to agree to pay them.
You don’t need your total closing costs in the bank until closing day.
TRUTH: Lenders will likely require that you have your total closing costs estimate in the bank, in addition to a couple months of mortgage payments (called reserves) prior to granting your full loan approval. If you do not have closing cost funds at the time of loan application, the lender might want to know where you will be getting the money from (i.e. payroll, sale of property, or gift), or the lender may have to approve the source.
The amount on the lender’s Good Faith Estimate is exactly how much you’ll need for closing.
TRUTH: Depending on where your lender is located, the figures on your good faith estimate may not be accurate. This is why it is best to select a local lender who is familiar both the local real estate market, and one who is current of state and local fees and taxes. Different counties and jurisdictions have different requirements for tax escrows. Out of state lenders may not have this accurate information, and our experience shows that providing accurate estimates is not a priority.

Remember, the Good Faith Estimate of Closing Costs is an important document. You should make sure that you have received this and reviewed it prior to making an offer on a property.

About Your Closing Costs

You’ve heard the term ‘no money down loans’. Well, that doesn’t mean that you can buy a house with absolutely no out-of-pocket cash. Closing costs are made up of two parts: down payment, and closing ‘costs’. It sounds redundant but when lenders say closing costs, they are referring to the charges that are incurred to secure your loan. The fees will vary from lender to lender, but here’s about what you can expect:

Closing Cost Item	Definition	Actual Cost?
Loan Origination Fee	A fee paid to the lender for processing the loan application.	1% of the loan amount
Discount Point	A one-time fee that you pay up front to lower your interest rate.This is 1% of the loan amount, and will reduce your interest rate by about ¼ percentage points.	1% of the loan amount
Appraisal Fee	A fee charged to obtain a written estimate of the value of the property.	$325 - $450
Credit Report	The fee charged to obtain your credit report from the three credit reporting agencies.	$40 - $65
Underwriting Fee	A fee charged to underwrite your loan to ensure that it conforms to all federal and company lending guidelines.	$200 - $400
Tax Service Fee	A fee charged to initiate your tax and insurance escrow account.	$50 - $75
Flood Certification Fee	Fee charged to determine whether or not the property is located in a flood zone.	$25 - $50
Document Prep Fee	Also called the 'Processing Fee'.A fee charged to process and manage all of the paperwork pertaining to your loan.	$150 - $300
Survey	The cost to establish the property's boundaries, and to determine if there are any encroachments.	$200 - $275
Settlement Fee	Fee charged by the settlement company to conduct the closing.	$190 - $300
Title Search/Title Exam	Fee charged to investigate the chain of title to ensure that there are no liens on the property.	$150 - $250
Title Insurance	Protection against loss from defects in title.	$4.68 per $1000 for first $100,000 of Sales Price + $4.08 per $1000 after that
Title Insurance Binder	The fee charged to obtain the commitment that sets forth the conditions in which the title policy is to be issued. This must be reviewed and approved by the lender prior to closing.	$50 - $150
State & County Recording Fee	Charged by County locality and state of Virginia to record the sale.	$3.33 per $1000 of Sales Price + $3.33 per $1000 of Loan Amount
Broker Fee	This fee is charged if you are using a Mortgage Broker to service your loan.	$500 - over $5000

Be Educated About Different Financing Options

The 30-year fixed loan is the most traditional type of financing. However, this type of financing offers you the least amount of flexibility with regards to your mortgage payment. The most common reason people give for selecting a 30-year fixed mortgage is because they don’t want their interest rate to change.

Adjustable rate mortgage can offer the stability of fixed rate mortgages as well. These loans can be fixed for one, two, three, five, seven, or even ten years. The advantage of adjustable rate mortgages is that they enable you to qualify for a more expensive home, and you can still have your interest rate locked for a specific period of time.

Interest only mortgages have really opened the doors to homeownership for many buyers. Many buyers feel that this type of mortgage is very risky, but in reality it is the equivalent to how your credit card payment works. The interest only mortgage is a powerful type of financing that allows you to control your cash flow. Your minimum required payment is the interest. This allows you to channel more of your dollars into other investments. Each month you have the option of making additional payments and have them count toward paying down your principal balance. As a homeowner, you reap the tax benefits of owning, while maintaining control of your cash, and having the option of making payments toward your principal balance.

When you work with our preferred lenders, you are able to see a matrix of how different mortgage programs affect your monthly payment. Each lender can prepare scenarios for you for different price ranges so that you can decide the type of mortgage will be a fit for yor Alexandria VA home purchase.