Construction Loans CA

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Closing Costs

Closing costs are the costs that are incurred in connection with the purchase or refinance of a home. The costs fall into the general categories of lender/broker, third party and prepaid costs. When we take or receive your loan application, you will be provided with a Good Faith Estimate of the specific costs that will be charged in connection with your particular loan. A summary that will help you, the buyer, estimate your closing costs, is as follows:

Third Party Costs
Appraisal	This fee is for an independent appraiser to prepare a written report that  of the value of the home that is being built, purchased or refinanced. The appraisal fee depends upon the project, but the fee for residential is generally between $350 and $700.
Credit Report	When you apply for a loan, a credit report is obtained from an independent company.  The cost of the credit report varies by company but consumers are generally charged $40-$60.
Escrow	An escrow company holds and distributes funds after all conditions specified by the lender and borrower are met.  Escrow fees generally start at $500 and increase by the purchase price.
Flood Certification	This is the fee that is charged by an independent company to confirm whether the property is in a flood area.  If it is, then the lender will require flood insurance.
Notary Fee	Certain loan documents must be notarized to establish the identity of the person that is signing the documents.   In California, the maximum charge per notarized signature is $10.  Additional fees may apply if the notary travels to the borrower's home or office for the signing.
Recording	The fee charged to record the new deed and mortgage.   A typical fee is $40.
Title Insurance	As a condition of the loan, the lender will require title insurance.  A title insurance company will perform a search of the title of the property and based upon a finding of clear title, the insurance company will issue a policy of insurance.   The cost of title insurance depends upon the value of the property.
Lender/Broker Costs
Discount and Origination Points	Origination points are charged by the lender or broker for evaluating, preparing and submitting a loan.  Discount points are paid to the lender to lower the interest rate.  Each point represents one percent of the loan amount.
Processing/Underwriting	These fees are charged for the processing and underwriting of the loan.
Prepaid Costs
Interest	This is the pro-rated amount of interest from the date of closing until the regular payments begin to accrue under the terms of the note.
Property Taxes	Real estate property taxes are paid to the local tax assessor.
Hazard Insurance Premium	Hazard insurance protects the property in the event of certain types of losses caused by fire, wind and natural hazards.  Lenders generally require the premium to be paid for hazard insurance for the first year.
Interest Reserve	An interest reserve is established from the proceeds of a construction loan to make monthly interest payments.  Interest accrues only on disbursed funds.  The borrower does not make out-of-pocket payments during construction.
Contingency Reserve	This is a reserve that is established from the proceeds of a construction loan to provide for unexpected costs or overages during construction.  The reserve is typically 5% of the hard costs of the project