It’s amazing that in a year with extremely low mortgage rates being reported around the country, closing costs are up by as much as 6% from the previous year. Part of the reason for this is that the stricter regulations on loans have increased the costs to banks, and they always find a way to pass on new costs to the consumer.
Understanding Third-Party Closing Costs
When closing on a mortgage the borrower will notice a long list of additional fees that they are expected to pay for. These can range from insignificant into the thousands of dollars depending on the state and the deal. When looking at these fees you will notice that some are third-party fees.
This is not out of the ordinary and you are not being taken advantage of. These costs are for services rendered by outside companies at the request of the mortgage lender to make sure everything is in order with the property.
Closing Costs You Can Expect To Pay
Anybody going through the mortgage process for the first time should expect to see several odd sounding terms on the bill. The first is ‘origination’ or ‘processing’ which is the primary fee the lender charges for creating the mortgage.
Other fees include discount points, flood certification, title insurance, credit report and appraisal. These are all necessary for buying a home and should be expected to appear when closing.
The Trick Behind Zero-Closing Cost Mortgages
With closing fees adding up it may seem like a good idea to opt for a mortgage that has absolutely no closing costs if it’s offered. While no money will be required up front, it adds up in the long run.
This is because the lender is making a deal. They agree to pay all the closing costs for the borrower in exchange for a slightly higher interest rate, which will pay out for them over the course of the mortgage.
The amount you can expect to pay really depends on the cost of living and real estate market where you’re buying. A mortgage specialist will be able to talk to you in advance of applying for your mortgage to give you a better idea of what you are looking at paying for closing costs. Contact one today for more information on why you have to pay closing fees and the amount you should be budgeting for.Share
About the Author:Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.