What Are Third Party Costs?

Third party fees are pretty straightforward: fees from a third party that usually don’t involve the lender. These third parties can be attorneys, insurance agencies or any association important to the home loan process that, again, the lender is not a part of. Third party fees are part of your closing costs, but are not the entire cost. Many people get confused by third party fees because they don’t ask their mortgage company what these fees are which are used to cover a number of different services. Below are examples of third party fees.

Appraisal
The appraisal is required to determine the fair market value of the home. A property appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. Therefore, a certified appraiser is needed to make this determination.

Credit Report
When you apply for a mortgage, you have to prove that you are capable of paying it back. Lenders will obtain a copy of your most recent credit report to review your borrowing history and ultimately determine if they should risk lending you money. This fee goes to credit reporting agencies like Experian, TransUnion or Equifax.

Closing/Escrow Fee
This fee is paid to the Title Company or attorney for conducting the closing.

Title Company Title Search or Exam Fee
This fee is paid to the title company for performing a detailed search of the property records for your home. The title company will look at prior deeds, court records, property and name indexes, and many other documents. This is to ensure that there are no liens or problems associated with your ownership of the property.

Survey Fee
A survey of the property may or may not be required to verify boundary lines for your property and to ensure that there is no encroachment on the lot.

Flood Determination/Life of Loan Coverage
This cost goes to determining whether or not your property is located in a federally designated flood zone through FEMA. If the property is found to be located within a flood zone, you will need to buy flood insurance.

Courier Fee
This covers the cost of transporting documents to complete the loan transaction as quickly as possible to avoid paying additional interest on your mortgage loan; typically done overnight or wired.

Title Insurance (Lender’s Policy)
This covers the costs of assuring the lender that you own the home and the lender’s mortgage is a valid lien. This is required with refinances.

Title Insurance (Owner’s Policy)
This is an insurance policy protecting you in the event someone challenges your ownership of the home. This is often associated with purchases and is not usually required.

Buyer’s Attorney Fee
This fee is paid to the attorney who prepares and reviews all of the closing documents on your behalf. This is on purchases and not always required.

Lender’s Attorney Fee
This fee is paid to the lender’s attorney for preparing and reviewing all of the closing documents on behalf of the lender. Not required in all states.

Transfer Taxes/Stamp Taxes
Real estate transfer taxes are taxes imposed by states, counties and municipalities on the transfer of the title of real property within the given state.