Mortgage Closing Fees & Costs Explained

Mortgage Closing Costs

When taking a mortgage and calculating whether you have enough money to buy the house, there are other closing mortgage costs that you must know of before.

Except the sales price of the home, there are a many other costs needed to be paid prior to the completing the mortgage deal.

What are mortgage closing costs

There are many mortgage closing cost, which can change from a person to person, and from one mortgage to another. Here are the main loan closing costs associated with the mortgage loan.

You should know most of them are worth negotiating terms to lower the costs.. the money you will have to pay will be needed as cash on hand payments before the mortgage is even given.

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You should shop carefully and examine all the fees and terms prior to closing. It is generally too late to change those fees and terms at closing.

1. The Real Estate Agent fees – It is common that the buyer pays for if he used a real estate agents to find the property he buys. The amount usually stated as a percentage of the price of property, and can be negotiated before the agent gets to work.

2. Loan Origination Fee The money is paid to the loan officer who handled the mortgage deal and worked through the whole documentation process. The amount is usually a flat dollar amount.

This “application” fee and an “underwriting” fee either to take the place of or be in addition to a mortgage origination fee.

3. Loan Discount Points or Mortgage Points –  This is a one-time charge by the mortgage lender in order to give you a lower interest rate on your loan.  The idea is that when you pay 1% of the loan upfront, you lower the risk or the lender which makes it worth giving you the mortgage interest discount.

Its a simple calculation to find out whether it is better paying the mortgage point upfront or stay with the current interest rate on your loan.

4. Appraisal Fees– Because the lender has to get money valuation estimate for the property you wish the mortgage for. The bank will  ask  independent, certified, licensed appraiser to visit the property and make an evaluation. The appraisal fee covers the cost for this visit, and are negotiable since it’s an independent appraiser who will be coming.

5. Credit Report Fees– Those are payed in advance while getting your credit score from the bank. The lenders companies will require a credit report to determine how risky it would be to give you the mortgage. It is this credit score that will influence the mortgage interest rate, and the terms of the mortgage loan you will get. This score is some estimation on your financial ability and willingness to repay the loan. The higher your credit score, the better chances for you to get a good loan.

6. Mortgage Insurance Application Fee – While asking for the mortgage, you will need in some cases to get an insurance application fees. Those fees are part of the money on hand you need to keep as part of the closing costs for the loan.

So What Can You Do To Improve Your Situation?

If you will do nothing.. don’t expect anything to happen. The best advice is to bump your credit score up! It will give you better leverage when facing the lenders, and better negotiation position when applying for any financial need.

Lets not forget you are probably paying $500-$1000 extra per year in higher interest rates, and credit payments.

If your score is below 700, you might want to clean it yourself – get this ‘Credit Repair University’ which will save you money and time.

Yes, you might need to invest a small sum to get a grip of things.. But if you think education is expensive.. try ignorance..

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You are probably paying thousands of dollars per year in fees and interests to credit companies which could be going straight to your pocket. Don’t be cheap when it comes to financial education..

Ignorance costs more.

Check here for more mortgage definitions.

 

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