Skip to main content

Closing Costs – The Best Way To Understand



What are Closing Costs?

Closing costs are the fees charged by the lender or a bank, over and above the loan amount to get the refinance done. The closing costs could be a deciding factor to understand if it is the right time for refinancing or not. Let us understand what are the components in the closing costs.
p.s: There are few fees which are known as third-party fees which would always be included in your closing costs no matter which lender you decide to go with. They are –

1) Appraisal fees

This is one of the third-party fees that shows under the closing costs. Usually, this is an out of pocket expense to the borrower which could be approximately $500. When you decide to refinance, the lender would need to look at the current property value in order to keep the loan to value ration in check. This is done by a third-party appraisal management company.

2) Escrow reserves

This is a charge collected by the lender to make sure they have enough property taxes and home owner’s insurance in the escrow account to pay when it is due. The amount would be the same no matter which lender you work with.

3) Title charges

Title fees are charged by the lender on behalf of the title company. It includes title insurance, title search fees, closing/escrow fees, mortgage recording charge, endorsement fees, etc. These fees also remain common no matter which lender you decide to work with.
Then there are few fees which are charged by the lender which are in their control and you can negotiate. These fees can vary from lender to lender. Having knowledge about these fees may help you in better comparison.

1) Loan origination fees

This is charged by the lender/mortgage broker in order to get the mortgage refinanced. This fee may vary from lender to lender which ranges anywhere between 0.0% to 3.0% of the loan amount. You can always negotiate the origination fees in order to lower your closing costs before you make your final decision.

2) Processing fees

The processing fee is charged by the lender/mortgage broker to process your loan application. Usually, the processing fees are anywhere between $300 to $1000. This fee is negotiable and you can save a huge amount in closing costs.

3) Underwriting fee

Many lenders/mortgage brokers may charge underwriting fees as part of their closing costs. Every loan goes through the underwriting process where the underwriter determines if the loans and documents are ready for closing. This fee is also negotiable and could help you to pocket some of your hard-earned money.

4) Credit report fees

This is the fees charged by the lender for getting your credit report checked from all the three bureaus Experian, Equifax, and Trans Union. The fee may range between $15 to $50 depending on the lender/mortgage broker you are working with. Every lender would be doing a credit check before sending the application for initial approval.

5) Discount points

This is charged by the lender in order to provide you lower interest rate compared to what you are qualified for. One point is 1 % of the loan amount. If the market conditions are already low paying discount points might not benefit you.

6) Daily interest charges

This is the amount collected by the lender in advance to cover the interest rate amount which is applied from the closing date to the first mortgage payment after the refinance.
So if you are planning to refinance these break up might help you to ask questions to your lender/mortgage broker and help you save your hard-earned money on the closing costs.

Call Us On (800)-756-0809 
Or
Select from the Below Options to Get a Free Quote.

Compare Your Quotes
Refinance Your Home
Buy a New Home
Home Equity Loan
Labels:
838 E 27th St, Houston, TX 77009, USA

Comments

Post a Comment

Popular posts from this blog

What is an Appraisal Contingency? — Best Guide for Homebuyers

  About Appraisal Contingency If a home is appraised for less than the purchase price included in the contract then there is a provision that is included in the purchase contract allowing homebuyers to back out of their contract this is termed as an  appraisal contingency  clause. Buyers who use financing to buy a house or are  buying homes  in areas where prices are volatile commonly use Appraisal contingencies. How do Appraisal Contingencies work? Purchase offers have appraisal contingencies inserted into them to notify the seller that the buyer intends to have the property appraised as part of their purchase for the financing process. If th e  property doesn’t appraise for the amount the buyer offered to pay then this contingency allows them the option of backing out of the contract without losing their earnest money deposit or facing other penalties. During an appraisal, a licensed professional is hired by the homebuyer to examine the property and evalu...
Post a Comment
Read more

Public Feedback Requested By CFPB

  The Home Mortgage Disclosure Act underwent certain changes and to evaluate whether it is meeting the stated goals of detecting discrimination in mortgage lending the  Consumer Financial Protection Bureau  is seeking comments. The CFPB requests for assessment of the mortgage disclosure law and checks if it meets the objectives of the  Dodd-Frank Act . To abolish discrimination in mortgage lending in 1975 the Congress enacted . The bureau said the request comes after an August report found that mortgage lenders as compared to white applicants were charging higher interest rates and denying credit to Black and Hispanic applicants. The   bureau said that with this evaluation the CFPB will be able to maintain a fair, competitive, and non-discriminatory mortgage market. They added that the assessment is an opportunity for the Bureau to get an idea if the earlier HMDA rulemakings have improved upon the data collected, thereby reducing loans on financial institutions,...
Post a Comment
Read more

What is Fannie Mae and Freddie Mac?

Understanding  Fannie Mae  And  Freddie Mac What is Fannie Mae and Freddie Mac? Fannie Mae or FNMA  is a nickname for Federal National Mortgage Association. It was established in 1938. It is a Government-sponsored Enterprise (GSE). In 1968, Fannie Mae ceased to exist as a government entity and became quasi-governmental, federally charted corporation to buy mortgages other than those insured by the Federal Housing Administration, otherwise known as FHA. Freddie Mac or FHLMC  is a nickname for Federal Home Loan Mortgage Corporation. Freddie Mac is also a government-sponsored enterprise (GSE) which was brought into existence in the year 1970 by the Congress. It provides competition to Fannie Mae and provides funds availability in the secondary mortgage market. What is Fannie Mae's and Freddie Mac's Role? Fannie Mae’s purpose is to create a secondary market for the purchase and sale of mortgages.  The secondary mortgage market ...
Post a Comment
Read more

Ultimate Guide About Lease Option With Its Pros And Cons

  About Lease Options When you are looking to buy a home there are a lot of things that a buyer needs to be prepared with like a good credit score, down payment, and commitment to ownership. However, what if you don’t have a  credit score  that could qualify you for a mortgage? Or what if you don’t have enough money for the down payment to  purchase the property ? There is a way you can prepare to buy that home through the lease option. In this post, we will understand what is a lease option and how it works. What Is A Lease Option in Real Estate? A lease option is an agreement or a contract through which a tenant can purchase a property in the future based on today’s market price once the lease ends. A lease with the option to buy also gives the tenant / potential buyer time to build credit and save money for the down payment to buy the property. Once you enter into a lease option, it prevents the seller to accept any future orders from other buyers. A lease option ...
Post a Comment
Read more