Mortgage Closing Costs - What Can You Reasonably Expect to Pay?
When comparison shopping for a mortgage loan it is important to compare the interest rate and all fees associated with the loan offers. Pay close attention to the origination fees, processing fees, and closing costs found on the Good Faith Estimate. Mortgage lenders will usually provide you a copy of the Good Faith Estimate if you ask for one. This document is critical for comparison shopping because the Annual Percentage Rate does not give enough information to make an informed decision as to which loan is best.
Before you consider closing costs, look at the origination fee found on your Good Faith Estimate. Make sure this origination fee is not greater than 1.5% of the loan amount for a home you occupy. The processing fee on the Good Faith Estimate should not be more than $400. If either of these fees is higher consider finding another mortgage company before looking at closing costs.
What are Mortgage Closing Costs?
Closing costs are the expenses you pay that cover the costs of finalizing your mortgage loan. Closing costs vary widely from one mortgage lender to the next and many lenders try and inflate these expenses. You can reasonably expect to pay as much as 3% of your loan amount in closing costs.
There are two types of mortgage closing costs. The fees are either non-recurring or recurring fees. Non-recurring fees are one time expenses you pay like the origination fee or discount points. Other non-recurring fees include the title search, survey, appraisal fee, and the cost of credit reports. Recurring fees and those you pay at closing and every year after that. These fees include mortgage interest, taxes, and insurance. To avoid overpaying these different closing costs it is important to carefully review the Good Faith Statements to find out what is being charged and who the fee is paid to.
You can learn more about your mortgage options, including costly mistakes to avoid by registering for a free mortgage tutorial.
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Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing - What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
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