Banker explaining the policy

Types of Lender Fees in Mortgage Closing Fees

Most potential homeowners realize that a mortgage is the best route to achieve their dream. This is not just a preserve of those without substantial funds to pay up front for a home. It also allows those who can afford the upfront payment to free their cash for other investments. When evaluating a home loan, most people concentrate on its four repayment components. These include the principal, interest, taxes, and insurance. When assured that they can comfortably manage the repayments, they sign the mortgage form without evaluating an essential element: closing costs.

The closing costs of a mortgage in Sandy encompass all fees that have to be paid at the loan’s closing. Most lenders will agree to lump in your closing costs into your loan, but this means higher monthly repayments and an overall expensive mortgage. The best way to handle the closing costs is to save up for them and pay for them up front. The standard categories of mortgage closing costs include title, lender, escrow, property-specific, and mortgage insurance costs. The following are the components of the lender or loan-related fees of your mortgage’s closing costs:

Application Fees

These costs cover the expenses of processing your mortgage request. They typically include administrative fees and credit checks. The precise amount charged for a mortgage’s application fee depends on the time frame it will take to process your request.

Legal Fees

Most states will require the presence of an attorney during the closing of your mortgage. This guarantees that all legal procedures have been duly followed and that the property you are acquiring comes with no legal limitations. The legal fees are computed according to the number of hours the lawyer will spend reviewing your mortgage agreement and advising you if need be.

Prepaid Interest

There might be some time lapse between the date of your mortgage’s settlement and the due date of your first monthly repayment. Most mortgage lenders will require payment of the interest on your loan during this period at closing. The amount paid for this depends on the time lapse and your agreed mortgage’s interest.

Loan Origination Fees

These are also called the underwriting, processing, or administrative fees. Loan origination fees are charged for the preparation and evaluation of your mortgage. The fees cover the lender attorney’s costs, notary fees, and document preparation expenses. More often than not, lenders will charge 1% of what you are borrowing as the mortgage’s origination fee.

Mortgage Points

Man show mortgage document

These are paid at closing to reduce the overall interest charged for your loan. Mortgage points are not compulsory but will prove cost-efficient if you plan on staying in the home you are buying for a long time. If you plan to sell it within a short period, the attractive interest rates might not benefit you much.

Buying a home generally comes with a few financial shockers. Without adequate preparation, a mortgage’s closing costs might mar your homeownership journey. However, once you understand what closing costs cover, you can prepare for them during the closing of your mortgage. The loan-related costs mentioned above, unlike other closing costs, vary among different lenders, so you can shop for the best rates.