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If you plan to purchase or refinance a home, you need to find out about the mortgage closing cost in advance. Many home buyers face unpleasant surprises at the closing, because they are asked to pay closing costs that they were not prepared for.
Practices regarding house closing costs differ from area to area. They usually amount to about 3 percent of the value of the home, though in some areas with high taxes they may be as high as 6 percent.
Some of the home closing costs are mentioned here:
* The application fee covers the initial cost of processing your loan request.
* Loan origination fees cover the cost of evaluation and preparation of your mortgage loan.
* Points are a one-time charge imposed by the mortgage lender. One point is equal to one percent of the loan amount, and the more points you pay, the lower your interest rate will be.
* An appraisal fee has to be paid to cover the cost of appraising the home, to determine if it is worth at least as much as the loan amount.
* An inspection fee may have to be paid if the home mortgage company requires an inspection of the home to ensure that it is in a good condition, and complies with local regulations.
* Your first mortgage payment may be due after 6 or 8 weeks, but the mortgage company may ask you to deposit pre-paid interest for the remaining days in the month in which you close.
* Most mortgage companies require private mortgage insurance (PMI) in case you make a down payment of less than 20 percent of the value of the home. This covers the risk to the lender if you don’t make the loan payments.
* If you get a mortgage insured by the Federal Housing Administration (FHA), or get a mortgage guarantee from the Veterans Administration (VA), or the Rural Housing Service (RHS), you will have to pay a premium or fee.
* Your mortgage lender will require a home owner’s policy at the time of settlement, and you will have to pay the premium for it.
* The mortgage company may charge a fee to determine whether your home is in a flood hazard area.
* You may also be asked to put some money in an escrow account to ensure that the property taxes, home insurance premium, and flood insurance premium are paid on time.
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