Your mortgage closing costs are the fees you pay up front when taking out or refinancing a mortgage loan.
These costs include origination fees, title fees, discount points, appraisals, underwriting and processing fees.
Basically any fee paid to the originator or a third party company involved with the closing your loan is considered a closing cost.
There are other fees that you’ll pay at closing including prepaid interest, escrows, and administrative fees that don’t really fall into the category of “closing costs.” You’ve probably heard about junk fees and want to avoid paying unnecessary closing costs when taking out or refinancing your mortgage.
Here are the basics you need to know about closing costs to help you avoid paying too much for your next mortgage loan.
The most common way to pay your closing costs when you purchase a new home is to write a check at the title company during closing. If you are refinancing it is common to roll these fees into the new loan as part of your mortgage. A less known way of paying closing costs is to agree to a higher mortgage rate in exchange for the cash to pay these expenses. This is actually how lenders like Bank of America offer so called “no fee” mortgage loans. The problem is you’ll never know how much these lenders pocket after paying your closing costs in exchange for that higher mortgage rate.
Whenever you take out a mortgage loan you can expect to pay thousands of dollars in closing costs if you are buying or refinancing; don’t fall for the “flat fee” you see from companies like Ditech or “no cost” mortgage loans from Bank of America…it’s a gimmick designed to get you in the door.
Mortgage Junk Fees
There are a number of fees you’ll encounter that serve no purpose and are headed straight for your mortgage company’s pocket. Courier fees, loan processing fees, affiliate fees, administration fees, document review fees, notary fees, all serve one purpose: to get as much money out of you as possible.
You can avoid garbage fees when taking out a mortgage to purchase your home or refinance an existing loan. According to the Secretary of Housing and Urban Development homeowners in the United States overpay nearly sixteen billion dollars every year.
You can learn more about avoiding junk fees and the unnecessary markup of your mortgage rate by checking out my Underground Mortgage Videos on this site.