Closing Costs Overview

In addition to down payment, property tax, and homeowners insurance, there are other fees due at closing.  Closing cots are paid by both buyers and sellers and some closing costs are paid when you apply for a mortgage loan.  This includes the cost of a credit check and the appraisal of the property.  Even if the loan is denied, these costs are not refunded.

Other potential fees and dues included in closing costs include:

Title Insurance Fee

Survey Charges

Loan Orientation Fee

Attorney Fees

Escrow Fees

Document Preparation Fee

Trash Collection Fees

Points

Be sure to take into account the fees and dues that make up closing costs when deciding on the mortgage loan you approve.  Some mortgages allow for the seller to pay a portion of the closing costs including title insurance, escrow fees, and points and some closing costs are added onto the principal amount of the insurance loan.

Both your monthly income and monthly debt and considered by lenders when determining your mortgage loan.  Lenders want to ensure that you will be able to pay your monthly mortgage payment so they take into account debts that will not be paid off shortly.

Your down payment is not included in your mortgage loan principal and must be paid in cash.  The more money you put as a down payment, the smaller your loan will be which results in lower monthly payments.  The size of the down payment depends on how much cash you have available as well as how much you need for other closing costs, prepaid property tax, and homeowners insurance.

The amount of your down payment depends on the mortgage plan requirements and vary from 0% down on a Veterans Administration (VA) Loan to 3-5% down on a Federal Housing Administration (FHA) Loan to the traditional amount of 20% down for conventional loans.  First time home buyers may be eligible for state programs that allow lower down payments than conventional financing does.

If you put down less than 20% as a down payment you will be asked to take out Private Mortgage Insurance (PMI) that guarantees that if you become delinquent and default on the loan, the debt will be repaid.  PMI will typically add an extra half percent to the loan.

FHA mortgages while allowing for low down payments will also charge Mortgage Insurance Premiums (MIP).  

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