Mortgage Closing Costs
September 20, 2009 by admin
Filed under Mortgage Loans
Loans and Mortgages have many fees attached to them. Borrowers have to expect to have to pay closing costs when taking out a mortgage. Mortgage Closing costs consist of all the fees included in the origination of a mortgage. These fees are not used to pay the lender. There are many different services which are performed when a person applies for a loan and these services are what the fees cover. The following is a list of some of the fees, but not all of the various fees, included in closing costs.
*Points – Points are equal to a percentage of your loan and the borrower either chooses to pay them or the mortgage itself states how many points need to be paid.
*Escrow deposits for taxes – This is to start an account that will be used to pay state taxes each year, this will vary from state to stat and from one property to another.
*Private mortgage insurance – Mortgage insurance is a safety net for the bank should you default on your loan, and many banks require that you carry it. The cost of this insurance averages about 0.5% of the value of the loan.
*Appraisal fees – These are used to pay the cost of having an appraiser perform an appraisal of your home. Banks usually require an appraisal to be sure the home has enough value to cover the cost if the borrower should default on the mortgage.
*Property survey – Many lenders require that a survey of the property be performed to determine exactly where the boundaries of the property are.
*Loan origination fees – This fee is paid directly to the lender. It covers the costs of having the loan paperwork processed and in order.
*Title Insurance – This fee is based on the amount being borrowed. The purpose of this insurance is to keep the title safe if someone would try to claim to own the property
*Inspections – Various inspections will be performed to assure you home is safe and pest free. This is a typical requirement before finalizing the mortgage.
*Homeowners insurance – This is to assure the value of the home is protected should there be a disaster of some kind.
*Credit reports – A credit check is run through the leading Credit Burroughs to assure the lender you are a reliable person and will repay the loan.
In addition to this list, you will find many other fees applied in the form of closing costs on your loan. Be certain to know and understand each and every fee charged. These fees are divvied up in various ways to pay for the many different services. As you go over each fee with your lender, make sure you suck up your pride and ask about any you do not understand fully. A lot of people underestimate the number and cost of all these fees, but each fee is to pay for an element required to assure the reduction of risk in the mortgage.
Do not get upset by the amount or cost of these fees. Remember, there are various things that are required when buying a home. Getting a mortgage is a huge investment for you and a large risk to the lenders when agreeing to give you the money. Be sure to assume these closing costs will be very high, and then you may be happy with the actual cost when they are all added up. The average closing costs range from $2,500 to $5,000. The actual costs depend on many factors.
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