The Real Estate Settlement Procedures Act (RESPA) requires that your mortgage lender give you a statement, which will break down all of your costs. It won't protect you against unwarranted charges—it just lets you know what are all of the charges against you at closing.
The real question for most buyers is not so much what will the charges be (like death and taxes, most can't be avoided), but when will you find out about them and what can you do about unwarranted ones? If you learn of unwarranted charges on the day you are set to close, it's a bit late to do anything. That's why your lender will give you a good-faith estimate of your closing costs at the time you apply for a mortgage. These may not be complete in that they may not cover all proration’s and some other charges, but they should tell you what your charge for obtaining a mortgage will be as well as give you an estimate of escrow and title insurance fees, if any.
If you are dealing with a good Hawaii real estate agent, that agent will prepare a list of your estimated charges even before you make your offer! The idea here is to show you what your true costs are so you can better decide how much to offer on the property. One agent I knew used to claim that she could come within $20 of the actual charges and most of the time, she did!
Keep in mind that there could be some sizable expenses to pay for the closing including the following:
- Points on your loan. You should be told the number of points by the lender, up front. Remember, each point is worth 1 percent of the loan amount. If you must pay 2.5 points on a $200,000 mortgage, that's $5000.
- Escrow and title insurance fees. These are usually based on the sales price. The higher the sales price, the higher the charges will be for these fees. Keep in mind that escrow and title companies compete and that one may therefore be slightly less or more than another.
- Attorney's fee. Usually the attorney's fee is around $1000 or less in states where attorneys are regularly used.
- Agent's commission. You pay this commission only if you used a buyer's agent and agreed to pay the commission instead of its being paid by the seller.
- Prorations. Taxes, insurance, rent, or other prorations could be next to nothing or amount to thousands of dollars.
- Other fees. These are usually in connection with the mortgage.
Determining just what your closing costs will be shouldn't be a difficult or arcane procedure. If your agent can't or won't do it, have the escrow officer or your attorney do it. Anyone familiar with real estate transactions should be able to come up with a very close estimate in short order.