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Understanding and Calculating Closing Costs

Selecting your closing agent

You have the option of selecting your closing agent from the list of settlement service providers that will be given to you. If you do not have a preference, we will select a provider for you.

Obtaining title insurance

Title insurance is one of the requirements for closing your mortgage loan. Your closing/title agent will issue a title commitment that contains the status of the title and conditions that must be complied with in order to issue a title policy. The agent will work with the necessary parties to attempt to resolve any title issues that must be cleared prior to closing. The loan policy insures us that the mortgage being recorded is a valid first lien. If you are purchasing a home, you will probably want to purchase an owner’s title policy to insure your interest. The charge for title insurance varies in each state. An estimate of these charges will be provided on your loan estimate. The title policies are prepared by the closing agent after the insured documents have been recorded.

Closing your loan

Closing is the final step to conclude the real estate transaction. It is usually held at a convenient location for the buyers and sellers and is conducted by a closing or settlement agent. The closing agent coordinates the details of the closing with all parties involved, prepares the closing disclosure, and issues a title commitment. Upon receipt of the commitment letter from Dollar Bank, the closing agent will schedule and perform the closing, disburse the funds and record the documents. As a borrower, you will be expected to sign the mortgage loan documents. The closing agent will notify you in advance of the amount, if any, you will be required to bring to the closing in the form of a cashier’s check or money order.

The closing date is set after you receive your commitment letter from Dollar Bank. Keep in mind that the closing must take place before your commitment and rate lock expire.

You may want to contact your Dollar Bank mortgage representative to review the conditions of your mortgage commitment and to discuss the other items required for closing. For example, all borrowers are required to provide a homeowner’s insurance policy with a minimum coverage of the loan amount that is in effect as of the date of closing, along with a paid receipt for the policy.

One of the most important financial forms you will receive is the closing disclosure. It is a list of the services and charges paid by the buyers and the sellers. It will be completed by the settlement agent and should be available to you one day prior to closing. The closing disclosure is signed by the buyers and the sellers.

After you receive your closing disclosure from the settlement agent one day prior to closing, you should review the charges. The closing disclosure will reflect the actual amount that you will need for the loan closing.

The settlement agent will review the closing disclosure with you and the sellers at the closing.

There are several other documents and affidavits which you will be required to sign to complete the transaction. The documents are listed below:


A legal document specifying the terms of debt including the amount to be paid, when installments are due and the term of the loan.

Mortgage (deed of trust)

A legal document that pledges a property to the lender as security for payment of the loan.


The legal document conveying title to a property.


The rider is a legal document that amends and supplements the mortgage. It is used on adjustable-rate mortgages to document such items as the formulation of rate and payment changes. It defines the limits or caps of the interest rate and the method of notice of interest rate and payment changes to the borrower. A rider is also necessary on all transactions involving a plan unit development or condo.


Closing costs are fees to be paid at settlement. These costs include the purchase of points, flood certification, document preparation and tax service. It also includes fees paid to third parties, including title insurance, recording fees and transfer recording stamps.

How much you can expect to pay in closing costs depends on the loan amount and the purchase price. The range is typically between 3% and 6% of your total cost. It's important to remember closing costs are separate from the down payment. For example, if you're buying a $100,000 home, you have $5,000 as a down payment and could also have another $4,000 to $5,000 in total closing costs with taxes and lender fees as a total.

Prepaids are costs and fees paid by the borrower upfront at closing. They include the amount of interest that has accrued daily from the date of the mortgage settlement (closing) to the beginning of the period covered by the first payment. Prepaids are paid prior to closing and at the closing table. Also, if an escrow account is established, funds sufficient to pay tax bills and homeowner's insurance will be required.

Lenders often set up an account called an escrow or impound account to provide the tax and insurance portion of your monthly mortgage payment. At the closing of your mortgage, the lender will collect sufficient money to establish the necessary reserves for an escrow account. This money plus the monthly deposit is then held until it can be used by the lender to pay the tax and insurance bills.

Title insurance is required to close your mortgage. It protects against title disputes that may arise regarding a particular property. Before your closing, a title company researches your property's title to ensure that it has been legally passed from buyer to seller every time it was bought or sold. Title insurance further protects the lender against illegal or fraudulent title transfers. You may choose to purchase an owner's policy that ensures that you have a good and marketable title. It ensures you against past events up to the date of the policy and is effective for as long as you own the property. The cost is based upon the mortgage amount and/or fair market value and varies in each state.

Yes, you must present a receipt of your homeowner's insurance policy showing the first year's payment at closing. The total amount of the policy must be for at least 80% of the replacement costs of the dwelling (binders are not acceptable). Your homeowner's policy must be issued by a company with a rate no less than B, Class III. In the event that you get your mortgage through Dollar Bank, you should also instruct your insurance agent to have the mortgage clause on your policy read as follows: Dollar Bank, Federal Savings Bank, its successor and/or assigns, c/o The Dollar Bank Servicing Center, P.O. Box 8469, Canton, OH, 44711 . 

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The information presented is general in nature and is for information purposes only. It is not intended to provide specific legal, tax or other advice to individuals.