Home Mortgage Closing Costs

Home mortgage closing costs are fees associated with home loans. When you become pre-approved for your loan the lender must disclose a good faith estimate (GFE) of all settlement costs.
A good-faith estimate shows the costs a borrower will incur, including loan-processing charges and inspection fees. When you pay your closing costs at closing it is usually paid with a cashier's check.

The title company or other entity conducting the closing will tell you the required amount for:

Down payment (unless qualified at 100%)
Loan origination fees
Points or loan discount fees you pay to receive a lower interest rate
Appraisal fee
Credit report
Private mortgage insurance premium
Insurance escrow for homeowners insurance, if being paid as part of the mortgage
Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you
Deed recording fees
Title insurance policy premiums
Survey
Notary fees
Pro-rations for your share of costs such as utility bills and property taxes

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Inspection Fees: Are usually paid outside of the home mortgage closing costs. Inspections are OPTIONAL. However, they are highly RECOMMENDED to protect the buyer from any faulty or fraudulent problems not seen by the potential buyer.

It is recommended that you save a minimum of $500.00 to cover these expenses regardless to being approved at 100% financing. Every home buyer is responsible for these expenses.

A Note about Pro-rations: Since such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Pro-ration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance.

For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first 5 days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.

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