Loan Related Closing Costs
Homebuyers have to take into account the closing costs when purchasing a home. The accumulated fees for services done to prepare and secure your loan are your closing costs. In addition, you will need to pay for the insurance and taxes on the property. The most prominent of these are the your loan related closing costs. Your Mortgage Broker will provide you with a full list of your loan related closing costs – however, the most common ones are listed here:
Loan Origination Fee
This covers the administrative expenses in setting-up and processing the loan. The loan origination fee may be a percentage of the mortgage amount.
A home buyer can pay points to lower the interest rate at which the loan will be repaid. Each point equals 1 percent of the mortgage amount. For example: on a $150,000 loan, 1 point would equal $1,500.
The fee for having the house appraised may be required by the lender at the time the loan application is submitted. However this fee may instead be incorporated into the closing costs.
The lender uses a credit report to determine the creditworthiness of the loan applicant. This fee is often paid when the loan application is submitted.
Typically the buyer is required to pay interest on the mortgage loan to cover the time between the closing date and when the first mortgage payment period begins. For example: If closing is on May 15. Your first monthly payment begins to accrue interest on June 1 with your first mortgage payment due July 1. At closing an interest payment covering the accrual period between May 15 and May 31 may be required.
Finally, a payment may be required at closing to fund the escrow account if the lender is paying home insurance, property taxes and/or other expenses out of the escrow account.