Mortgage Loans
By: Meghan Carter

Mortgage Guide Step 6: Closing Costs For Mortgage Loans

    Mortgage loans may cost more money than you expect. If you think the only cost of mortgage loans are the down and monthly payments, think again. At the closing of all mortgage loans there are a number of extra costs.
    All mortgage loans have different closing costs. The amount of your closing costs will depend on your lender. Often people are so obsessed with the cost of the mortgage, they forget to factor in the closing costs. They go to sign their mortgage loan and are shocked by how much extra they owe.
    In order to get the best mortgage loan, you should factor in both the interest rate and the closing costs. Some mortgage loans offer no closing costs. It may seem like a good deal at first, but remember nothing is ever free. The closing costs are added to the cost of your mortgage loan (Quinn, 120).
    Before signing your mortgage loan, your lender is required to give you a good faith estimate. The good faith estimate should be given to you within three days after you submit your application, and it should contain the list of all fees you must pay before and during your closing ("100 Questions and Answers About Buying a New Home"). Keep in mind that the good faith estimate is an estimate. It is not always correct. You could show up to your closing only to find that you owe much more than what was estimated (Quinn,120).  
    Out of the many closing costs you may have to pay, here are the most common ones you will see.

Escrow Account: When you have an escrow account, you lender takes the responsibility of paying your homeowner's insurance, mortgage insurance and property taxes ("100 Questions and Answers About Buying a New Home"). The price of those payments is added onto your monthly mortgage payments. Escrow accounts are good for people who don't want to be bothered with remembering to pay their homeowner's insurance, mortgage insurance or property taxes. However, escrow accounts aren't all good. Because your lender is given the responsibility of making those payments, you are not ensured that they won't forget to make one ("100 Questions and Answers About Buying a New Home"). If you would like to control those payments, you can ask your lender to let you make the payments. The downside of making your own payments is that your lender may charge a fee; however, the plus side is that you can invest the money until it is owed instead of paying for it ahead of time with your mortgage payments (Opdyke, 50).

Points: At the closing you will have the chance to pay points. Each point costs 1% of the total amount of your mortgage loan ("100 Questions and Answers About Buying a New Home"). The benefit of paying points is that each point you pay lowers your interest rate. Paying additional points is a good idea if you plan on staying in your house a long time (Opdyke, 49). However, if you won't be in your house long, paying the additional points will cost more than the interest charges you will save (Quinn, 113).

Home Owners Insurance: Your lender will probably require that you have home owner's insurance (Orman, 306). Don't be surprised if you have to pay an entire year's insurance or if your lender puts your insurance fees into escrow (Opdyke, 50).

Additional Add-Ons: There are many other closing costs you may be charged. Some include, title examination, abstract of title, title insurance, property survey fees, fees for preparing deeds, interest, notary fees, credit report fees and property taxes ("Looking For The Best Mortgage"). When looking over your closing costs, ask your lender about any you do not understand.


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