Reverse Mortgage pitfalls: Closing costs

Closing costs are part of the payment a borrower has to make to take a reverse mortgage plan along with others such as insurance, interest, origination fee, etc.

Closing costs are generally not kept in mind while taking reverse mortgage as it is actually sum of many small parts which when added become significant and surprise a poor home owner. The details of what is included in the closing costs along with numbers are given below:

  1. Credit report fee to verify any federal tax liens, or other judgments, handed down against the borrower.

    • Cost under USD 20
  2. Flood certification fee to determine whether the property is located on a federally designated flood plane.

    • Cost under USD 20
  3. Escrow, Settlement or Closing fee includes a title search and various other required closing services.

    • Cost around USD 150- USD 450
  4. Document preparation fee to prepare the final closing documents, including the mortgage note and other recordable items.

    • Cost between USD 75-USD 150
  5. Recording fee is charged to record the mortgage lien with the County Recorder's Office.

    • Cost between USD 50- USD 100
  6. Courier fee is levied to cover cost of any overnight mailing of documents between the lender and the title company or loan investor.

    • Cost under USD 50
  7. Title insurance is the insurance that protects the lender (lender's policy) or the buyer (owner's policy) against any loss arising from disputes over ownership of a property. This number varies by size of the loan, though in general, the larger the loan amount, the higher the cost of the title insurance.
  8. Pest Inspection to determine whether the home is infested with any wood-destroying organisms, such as termites.

    • Costs under USD 100
  9. Survey cost is to account for survey that determines the official boundaries of the property.

    • Cost USD 250

As it is evident there are lot of small charges here and there, taking max (excluding title insurance) of all the sum can be as large as USD 1,150 which can be close to 1% or more for a small house.