Closing Costs

You have found the home of your dreams. Surprisingly, it falls just within your tight budget. The monthly payment is just exactly the way you want it to be. Then, you prepare yourself to finally sign the papers and finally take possession of your home. But have you ever considered of mortgage closing costs?

What then, are closing costs? Most lenders these days make it a point to prepare the borrowers for those closing costs by giving them “Good Faith Estimates” of the costs. A borrower can receive the statement right away, but the lenders are required to have the statements mailed to the borrowers within three business days from the date of the application.

Since your lenders do this, you then assume that the closing costs are generally with the lender. Do not be easily misled by your lender’s attempt in providing you with this particular service. Your lenders are only preparing the estimated cost that you may incur upon buying or even refinancing, Lenders are not required to provide you with a comprehensive list of all the possible costs that you will encounter beyond and above your home’s purchase price. As a result, a borrower has to expect that those actual costs are more than the estimates only.

For example, are you purchasing a new home that has just been built? Have you ever tried to consider the costs of your window coverings are part of closing costs? This is one mortgage refinance closing costs that you are not aware about, right? But then, your lenders should disclose all possible closing costs that are normally charged to you, even if they still cannot determine all those other charges that you will encounter along the way. Some of the possible closing costs that your lenders will explain to you are the following:

Loan Origination Fees- These are the fees that are usually known as the loan origination fees are sometimes called as ‘points’. These fees cover the administrative costs of the lenders in processing your loans. These are often expressed as percentages of your loan, but with varied fees from varied lenders. Generally, the buyers are the ones that pay for the fees, unless negotiated otherwise.

Loan Discounts- These are just agreeable to those homeowners who are looking for those no closing cost mortgages. Often called as ‘discount points, these loan discounts are those one-time charges that are imposed by mortgage brokers or lenders at lower rates at which the brokers or the lenders would otherwise offer a loan to you. Each ‘discount point’ is generally equal to about one percent of your total mortgage amount.

Appraisal Fees- These are the fees for the appraisal reports that are made by your appraiser.

Credit Report Fees- These fees generally cover those costs of your credit reports that openly show all your credit history. The lenders will use all necessary information from your credit report to evaluate whether you will be approved for a loan and to determine how much money the lender can lend you.

Lender’s Inspection Fees- These fees cover the inspections, mostly for those newly-constructed housing. The inspections are done by your lender’s employees or by other outside inspectors.

Application Fees- These fees will cover for all the processing of your mortgage insurance application.

Assumption Fees- These fees are charged when you take over or “assume” the seller’s duty to pay any existing mortgage loan.

Mortgage Broker Fees- These are generally the fees that are charged to the borrower for the mortgage brokers.

Since closing costs are some things that are not fully explained to you during the whole course of your mortgage inquiries, it is important that you have to discuss this properly with your lenders. That way, you will not be confused with those unexpected monthly payments that can somehow be a bit unfair to you, especially if you are not aware about it.