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Closing Costs

Q: What are Closing Costs?
Closing costs are one-time fees required to close a mortgage loan. Examples include underwriting, escrow, and title insurance fees.
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Q: What fees are commonly included in closing costs?
Credit Report Fee - Charged by credit reporting companies to prepare your credit report.
Underwriting Fee - Charged by the lender for facilitating the loan approval process.
Tax Service, Flood Certification, and Wire Fees - Set fees charged by the lender for required third-party services.
Appraisal Fee - Paid to a third-party appraisal company. Salmon Bay will help facilitate this payment during the loan process.
Title - Paid to the title company for ensuring transfer of title.
Escrow - Paid to the escrow company for managing document signing and transfer of funds required to close the transaction.
Recording - Paid to the county for recording the transfer of title.
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Q: What is the difference between true closing costs and prepaid closing costs?
All of the fees described above are true closing costs, or one-time transaction fees. Prepaid closing costs include prepaid interest, hazard insurance (homeowner’s insurance), hazard insurance impounds, and property tax impounds. Prepaid closing costs are often referred to as recurring closing costs or impounds. The terms prepaids and impounds are used interchangeably.
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Q: What is the difference between Cash to Close and Closing Costs?
Closing costs are the costs associated with creating your loan. Depending on how you and your LO structured your loan, this figure can be zero. Sometimes you can even get money back. Cash to Close is the dollar figure that you need to show up with when you sign your loan docs. The Cash to Close is determined by:
Purchases:

Cash to Close is calculated by adding your down payment and closing costs together, and subtracting your earnest money.
Refinances:

Cash to Close is calculated by subtracting the closing costs and the payoff for your old loan from your new loan amount.
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Q: What are points and discount points?
A point is 1% of the total loan amount. One point on a $200,000 loan would be $2,000.00. A discount point is a fee the borrower pays the lender to secure a lower interest rate
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Q: Can I use discount points to alter my rate?
Yes you can. Remember, the higher the rate, the lower the closing costs. Your LO will be happy to discuss your range of options, and compare those options based on your short- and long-term goals
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Q: Am I better off paying a lower origination fee or securing a lower interest rate?
There is no one right answer. Your loan officer can help you weigh the pros and cons of each strategy to determine the best approach based on personal factors such as how long you plan to stay in the home and how much you have in savings.
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Q: Do fees vary from broker to broker, or broker to banker?
They may. Lender and Brokerage fees can vary slightly from shop to shop. Also, when visiting a retail bank for a loan, the fees you will be shown to complete the loan will cover the same services, but may have different names. The most important thing when choosing a mortgage broker is confidence and clear communication in the relationship.
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Q: Can I roll my closing costs into the loan amount?
On refinance loans, closing costs are typically added to the loan amount so you have minimal out-of-pocket fees. You can also choose to pay them out-of-pocket to keep your loan amount down. On purchases, borrowers typically pay the closing costs along with their down payment. A common alternative is for the buyer/borrower to negotiate to have the seller pay a portion of the closing costs.
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Q: Why should I use a mortgage broker vs. going directly to the bank?
A mortgage consultant at a bank can only offer you the loan programs of that particular bank. The rates are often not as low as you will find with a mortgage broker, who is able to shop around to find the best loan program for the borrower’s needs. Working with a bank can be compared to shopping retail, while working with a mortgage broker can be compared to shopping wholesale.
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Rates

Q: What is your rate on a 30-year fixed mortgage?
This is our most frequently asked question and the answer is always the same: It depends who is asking and when. Mortgage interest rates change daily and can vary significantly depending on the term, type of loan, and the financial situation of the borrower.
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Q: What personal factors determine the rate for which I qualify?
Here are the financial factors that apply to most borrowers:

  1. Credit score.
  2. Your debt-to-income ratio.
  3. Whether you live in the home or will use it as an investment property/vacation home.
  4. The value of the property.
  5. For purchases, the size of your down payment.
  6. For refinances, the amount of money you are willing to contribute at close.
  7. For refinancing, the rate is generally higher if you are taking cash out or rolling in a second mortgage.
  8. The amount of money you can bring to the close of the loan (in addition to down payment for purchases).
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More questions about closing costs? Call us at 206.789.8629. We’ve never been stumped.