Loan-Related Closing Costs

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.

Points (optional)
An option for the home buyer is to 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.

Appraisal Fee
The fee for having the house appraised may be incorporated into the closing costs or payment may be required by the lender at the time the loan application is submitted.

Credit Report
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.

Interest Payment
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.

Escrow Account
At closing a payment may be required to fund the escrow account if the lender is paying home insurance, property taxes and/or other expenses out of the escrow account. Your total monthly payment with include 1/12 of the annual expenses for these items. An escrow account is required on all Gov't loans such as FHA, VA and USDA. Conventional loans do not require an escrow account if the loan-to- value ratio of your property is 80% or less.

Title Charges and Title Insurance
There are fees paid to the settlement company or attorney for researching, assembling and reviewing the title binder for accuracy. There are other fee's for title insurance, lenders require title insurance on the outstanding loan amount paid at settlement. Additionally the home owner can buy an owners policy to protect tier equity for a small amount. The owners policy is not required but is recommended. A title policy is protection against any unrecorded/unknown liens tied to the property.

There are additional settlement costs in addition to the lender related closing costs.
These costs include such items as state and local transfer and recordation taxes, home inspections fees, termite/pest inspections, property survey ect. These fees may or may not apply to you. They not universal in nature and are different for each jurisdiction.