Mortgage Closing Costs

These are the fees charged by the mortgage company to cover the costs associated with originating a mortgage loan.  

Origination fees include any lender fee to cover overhead and could include such things as origination fees, application fees, underwriting fees, commitment fees.

While in the origination charge section of the disclosures, this fee is paid upfront in order to lower the overall interest rate.  It is the price for the rate.

There could be a premium or credit for the rate that can be used to pay closing costs.   This is how no cost home loans work. 

These fees are separated into two buckets, fees for services you CANNOT shop for and fees  for services you MAY shop.

Examples of fees and services you may not shop for include credit report fees, appraisal fees and mortgage insurance.

Examples of fees and services you may shop for include title fees, survey fees and inspection fees

Depending on the state and county, real estate taxes may be paid in advance or arrears.  There may be a few months that may need to be paid whether in advance and are typically prorated. 

This can be an unexpected cost for a homeowner.  Usually you are required to pay for your homeowners insurance for one year and provide the paid receipt at closing.   This can be over $1000.00

Flood Insurance is required if you are I a designated flood hazard area and can be very expensive. 

The escrow or impound reserves are the funds needed, and that are placed into a special trust account for the benefit of the borrow to future taxes and insurance costs. 

The equivalent of 1/6th of your taxes and insurance is usually required (2 months).