Navigating through different mortgage costs and fees can be very confusing.
The total cost of a mortgage can be split up into two different categories. One of them are items controlled by the lenders, while the other are items controlled by third parties. The combination of both is the total that you will have to pay once the loan closes.
When you are trying to evaluate different home loan offers, you should focus on the different costs that the lender controls. There are a few different items that are controlled by the lender.
One of the most prominent ones is the interest rate, which is essentially the cost of you borrowing money. Higher interest rates mean higher monthly payments. The interest rate will be used to calculate your monthly payment.
Another is discount points, which is a fee you can pay to reduce the interest rate. Buying these types of points is a good idea if you plan to live in your house for awhile, since saving money on interest payments. This is going to add up in a big way down the road.
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Lenders charge an origination fee for actually processing a mortgage application. They process an application by verifying your financial information, checking credit reports, and actually building a loan for you.
You might also be paying a variety of other lender-set fees, such as a rate-lock fee. This gives you the chance to lock in an interest rate after a certain period. You might also pay fees for applications, other processing, and for having the pertinent documentation prepared for a mortgage.
Fees that are set by local and state governments are not able to be controlled by your lender. These include service charges for the different people who will have to be in the home buying process. This includes inspectors to check a home’s condition and appraisers who will figure out its value. Your lender might be able to choose the vendor they want to carry out these services, but some will leave the choice up to you.
Other fees have to do with title services. One fee is charged by the title agent for processing the paperwork to determine homeownership. Another is charged by a title insurer to protect the lender if there are any sort of unpaid liens.
You might also be on the hook to pay for transfer taxes as part of the mortgage process depending on where you live. The closing of home loans will also require the payment of government recording charges to state and local agencies along with an escrow deposit if applicable.
It is important to get a good idea about your home loan cost before actually going through the process. Hidden or surprise costs can make the end payments much different depending on your situation.
Do you have a question about mortgage costs? Call the Reed Team today at 949-392-6400!