Mortgage loan closing costs
There are many types of fees and charges payable towards mortgage loans and mortgage loan closing costs are one of them. In fact, these constitute considerable percentage in overall cost of loan. Mortgage loan closing costs are basically the payments that have to be made by a borrower when he finalizes the mortgage loan agreement. It has been seen that these costs vary not only from one state to another but also from one community to another.
There are some mortgage loan closing costs that are determined by law while some other costs are determined by the lender. Some costs are charged simply as a customary in the region. If a person is comparing different lenders for choosing the best one, he must take into consideration interest rates as well as mortgage loan closing costs for taking any decision. While taking a mortgage loan, a person must be prepared for paying some typical closing costs. It is important to understand here that lending institutions are required by law to provide all information about these costs and offer a good estimate too to the borrower. Any type of mortgage loan closing costs requirements should be notified to borrower. A real estate attorney can prove to be of much help in understanding different types of mortgage loan closing costs.
It has observed that most of people misunderstand mortgage loan closing costs at the time of taking mortgage loan and later on, these prove very frustrating. It is not that borrower is always required to pay the closing costs for mortgage loans. There are some cases in which seller also pay the mortgage loan closing costs. It all depends upon prior negotiations made between buyer and seller. All types of mortgage loan closing costs charged are provided in the Good Faith Estimate of lending institution.
Most of experts feel that if a person wishes to get loan at minimum closing costs, he should obtain Good Faith Estimate from at least 3 mortgage lenders in the area. It should be noted here that Good Faith Estimate is just approximation and actual closing costs charged may vary to good extent. Under RESPA, a borrower can make request for getting HUD-1 settlement. In this statement, all types of closing costs charged by a lender are provided. This statement can be obtained one day before the settlement. Let us discuss about different types of mortgage loan closing costs next.
Different types of mortgage loan closing costs
Discount and Origination Points is an important constituent of mortgage loan closing costs. Points are equal to percent of amount obtained as loan. For example, 2 points mean 2% of loan. Discount point is the additional money that a borrower can pay to lender at the closing of loan. If any borrower pays more points towards mortgage, he is able to lower the interest rate. Reduction of interest rate varies from one case to another. If a person plans to remain in the home for longer duration, it is good if he pays good points. Origination fee is charged by the mortgage lender for preparing, evaluating and submitting the loan offer. Origination fee is generally expressed as percentage and is charged with respect to loan amount. For example, origination fee of 1% is equal to one percent of loan amount.
Application fee is also an important constituent of mortgage loan closing costs. This fee covers the cost of lender for processing the information provided by the borrower for getting the loan amount. This type of fee is generally charged at the time of filing the application but can be charged later on also. If a person does not take the loan or is not approved for same, lenders do not refund this fee generally.
Appraisal fee is another constituent of mortgage loan closing costs and varies as per the price of home. Generally, appraisal fee charged vary from $150 to $400. This fee is payable towards independent appraisal of the home or real estate that a person intends to purchase and estimated market value is obtained by a lender for taking decision. Appraisal is one of most important factors in determining the amount of loan. Borrower can request for the copy of appraisal.
Another constituent of mortgage loan closing costs is credit report free. For taking decision, lender obtains credit report of borrower from credit bureaus and charges fee from the borrower for same. In most of cases, credit report fee charged varies from $45-$55.
Mortgage loan closing costs also contain fee towards title search and title insurance. Through title search, which is historical record of the real estate, clear title of the real estate is obtained. Various types of records or documents used are court records, deeds, name and property indexes, etc. It is also found out that there are no liens against the property. Title search also provides information on unpaid taxes, judgments, etc. Title insurance protects against unpaid mortgages, tax liens etc. All types of court fees and legal defense fees are paid when any claim is made against the property.
Survey Fee is another important constituent of mortgage loan closing costs. This fee is paid towards the survey of the property and is done for verifying the official boundaries of real estate. This type of fees depends upon the size of property and also varies from one state to another. Generally, a person is required to pay from $225-$350 as survey fee.
There are some lenders that charge fee towards escrow account also after the loan has been closed.
Apart from above, there are many other costs also that are required to be paid and are included in mortgage loan closing costs. For example, flood certification fee, recording and transfer fee, interim interest, buyer's attorney fee and lender's attorney fee are some types of additional fee charged.
For calculating mortgage loan closing costs, a person can easily use closing cost calculator available online.
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