Mortgage Loan Costs

The principal and interest charges are only part of the payments that borrowers make. The closing costs vary and include fees such as re-conveyance, title policy, processing, and others. The loan origination fee, for example, varies depending on the state or province of residence and can be as high as 2 percent of the total amount. It is also called processing, administrative, and underwriting fee.

Lenders charge inspection, application, escrow, and other fees. An appraisal is necessary to determine the value of the property, which varies in buyer’s and seller’s markets. Different factors play a role in appraisals, including overpricing, too many short sales and foreclosures in the area, and fewer home buyers on the market.

Finance companies include different charges in the closing costs, including statement and release fees and discount points. Points are basically prepaid interest charges that help reduce the rate of interest. Discount points are known as loan discount, premium fees, and origination fees and are offered to borrowers who apply for certain types of loans. Applicants who seek funds for home improvement projects, remodeling, improvements, and construction works qualify for discount points. Those who want to buy a vacation or second home are unlikely candidates, especially if they plan to charge a rent. Beneficiary demands are associated with the status of the loan, and borrowers who apply for a second mortgage or home equity loan are asked to submit a statement. There are associated fees to pay, including late fees, recording and statement fees, and other charges, if applicable. The demand is usually valid for a period of one month. The document contains details such as phone number and address of the financial institution, the outstanding balance, etc.

There are different ways to calculate the closing costs by adding the property taxes and charges associated with the loan. Borrowers can use online calculators for this purpose or to check whether they can save on other charges. Charges to include are endorsement and re-conveyance fees, title insurance, and others. The user can add other fees as well, including title document prep fees, transfer taxes, and government recording charges. Some lenders also pull the borrower’s credit report and add the associated charges. These fees are considered miscellaneous, and many borrowers think that the interest rate is the most important factor. The interest rate varies but as a rule, credit unions offer more favorable rates. Generally, there are three types of mortgages – variable rate, fixed rate, and hybrid loans. There are different types of interest rates, including capped, fixed, and discounted. Some borrowers opt for a discounted interest rate while others for cash back deals and fixed rates. Ask whether the mortgage comes with insurance because banks keep extending and updating the range of products they offer. Online calculators help determine the closing costs as well as the right type of mortgage product.