Closing Costs For Mortgage Loans and Mortgage Refinance

What Are Mortgage Closing Costs

Mortgage closing costs are fees and expenses incurred by the buyer to complete the transaction of the home and the processing of the residential mortgage. These costs can make up to 3% of the mortgage loan principal and can either be paid upfront or be incorporated into the home loan mortgage or a refinance mortgage in the form of additional points to the mortgage interest rate charged. The higher borrowing rate on your home mortgage loan means the less money you have to initially put up. A no closing costs mortgage or refinance no closing costs mortgage means you did not pay for any points on your home mortgage loan in order to lower your borrowing costs.

What Goes Into A Home Mortgage Closing Costs

Buyer’s Closing Fees: These are the fees that the buyer will incur for processing a residential mortgage.
• Loan application fee
• Lenders processing fees
• Lenders credit report
• Lenders appraisal fees
• Lenders documentation preparation fees
• Prepaid interest on loan - prepaid per day until the end of the month in which the closing happens
• Lenders insurance escrow – could be up to 20% of the cost of a one year homeowner's insurance policy
• Lenders tax escrow - Depending on the time of year you close this could be up to 50% of the yearly property taxes
• Lenders tax escrow service fee- fees to set up the tax escrow
• Premium Mortgage Insurance (PMI) - applicable if the down payment is under 20% of the sales price
• Title insurance cost for lenders policy - depending on which part of the country you reside, a portion or the full amount may be paid by the seller
• Special endorsements to the title - Depending on the property you choose, the lender may have the buyer pay special endorsements such as an environmental lien endorsements or location endorsements to name a few
• House inspection fees -any that still remain outstanding
• Title/escrow company closing fee
• Recording fees, for the deed or the mortgage
• Local city, town or village property transfer tax, county transfer tax and state transfer tax -- these charges can vary form city to city and state to state
• Flood cert fee - fee to examine if the home you chosen is in a flood plain
• Buyer attorney's fee
• Association transfer fee
• Condo move in fees
• Co-op apartment fees -- fees that may be necessary to transfer the shares of stock in the property to the buyer
• Credit checks ordered by the condo or co-op board

Buyer Beware

Some mortgage lenders advertise very low interest rates in order to catch your attention. Upon further examination you may discover that this is contingent on you paying one, two or three points upfront at closing. Not all fees are included in the advertised rate. One point means 1% of the mortgage loan amount. For a better indication of the true borrowing rate, look for the APR, the Annual Percentage Rate. The APR tends to be higher than the advertised mortgage interest rate since it includes some of the processing costs of a home loan.

Ask For The Good Faith Estimate (GFE)

A GFE Good Faith Estimate is a document furnished by the prospective mortgage banker that lists all the costs associated with processing a mortgage loan. By having a few Good Faith Estimate GFE to compare, you can learn what fees are incorporated and find out which mortgage company is more forthcoming regarding the costs of your transaction. A good mortgage lender’s final home loan closing costs tends to match the good faith estimates.

Mortgage Loan Fees Are Negotiable

Depending on the situation with the seller of your house and your mortgage lender, you might be able to negotiate better terms for mortgage closing fees. Both the buyer and the seller are responsible for portions of the closing costs. If the seller is eager to make the transaction, he or she might be willing to assume some of your closing costs. The majority of the fees are related to the residential loan where the house mortgage lender charges certain fees for processing your mortgage. If you have good credit standing, you can ask for certain fees to be waived or reduced.