Fees and charges during mortgage closing

During the closing of a mortgage loan, there are many fees that will come up, both expected and surprising ones. Generally, it has become an honest practice where a mortgage company will spell out all of the fees and charges that are added onto the home loan, but there are still some that choose to hide the charges. There are some general fees that can be found on almost all closing costs and mortgage loans in general. Whether or not the particular mortgage company decides to disclaim the fees or not, they are on there. When going into the closing of a mortgage loan, it would be wise to at least ask to see what the additional charges and costs are. If at all possible, someone could try and pay off some of them, which will save them money on the interest later on.

The first type of fee is the discount and origination points. Points in a mortgage loan are equal to a percent of the original loan amount. Discount points represent additional money that a person can pay to the mortgage company at closing. If someone pays more points it will lower the interest rate by reducing the amount of principal. Usually, for each point paid on a 30-year mortgage loan, the interest rate is reduced by about 1/8th (or .125) of a percentage point. Paying points can be good if a person plans on living in the home for a long time.

Origination points (or loan origination fees) are charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan. Origination fees are often expressed as a percentage, like the points. A one percent loan origination fee is equal to 1% of the loan amount. Some lenders add origination points into their quoted points while other lenders add an origination point in addition to their quoted points.

The appraisal fee is on every mortgage loan closing charge list. This fee ($150 to $400 depending on the price of the home) pays for an independent appraisal of the home that a person wants to purchase. The amount will be determined by market values currently in place. Factors to be considered in determining market value are: present cash value; use; location; replacement value of improvements; condition; income from property; net proceeds if the property is sold, etc. The appraisal is a critical factor in determining how much of a mortgage the bank or mortgage company will approve. After the appraisal is completed, the borrower is normally entitled to a copy of the appraisal from the lender.

The credit report fee can be avoided, if the person has already planned ahead and gotten those reports before looking for a mortgage loan. Title search and title insurance is basically a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents.

A title search can show a number of title defects on the mortgage loan; among these are unpaid taxes, unsatisfied mortgages and judgments against the seller. But there are some hidden defects that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his marital status, resulting in a possible claim by his legal spouse.

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