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.
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 mortage 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.
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Loan Origination Rate Explained
Loan Origination Rate
When you decide that you need a mortgage for buying a new house, you should do a research to get loan and interest quotes. You are the buyer of the loan and part of your financial responsibility is to shop for the best offer you can find.
Some may under estimate this stage in the mortgage or home loan refinance process. But every little bit you can save, that may seem too ‘small’ to argue about can sum up for a lot of money! If you manage by mortgage rate quote shopping to save $30 every month, it gathers to an impressive sum of $10,800 savings for a 30 year mortgage! So shopping is highly recommended.
Getting Pre-Qualification
The first step will be a process of pre-qualification with the loan officer who helps you through these first steps.
It is very common that the bank or lending company will ask the loan originator to supply certain credit, asset, employment, FICO score and housing information to a specified bank or lender to initiate the underwriting of the loan application.
In this process there is a need for documentation gathering, some research to be done, and th loan broker who handles this process will be managing it all. For this service and counseling the origination rate is set.
Loan originators are loan officers, mortgage brokers, or simply sales people. Loan origination fees is payed to the loan officers who do this process. A loan origination rate is a negotiable payment outside the mortgage loan payments. This originating loan fees, you will be asked to pay in cash at mortgage closing.
If you have enough cash on hands, it might be financial wiser for you to pay mortgage origination rate and not have them mounted on your mortgage, higher mortgage will carry interest rate for the whole mortgage life term, so paying outside closing (POC) can be a way to save money on a lower mortgage interest rate.
These mortgage points are paid to the loan officer who completes the loan transaction with the homeowner. Because these are part of your expected loan closing fees, you are in a great position for negotiation with the loan officer for a better interest rate.. or you walk from the deal…
Check here for more mortgage definitions.
