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 Closing Costs 

Closing costs may sometimes be calculated into your loan amount. The lender would agree to allow the home buyer to finance the closing costs, minimizing the buyer's out of pocket expenses. Closing costs can range from 1 to 5 percent or more of the value of the home.

You can divide all closing costs into two basic groups:

• Amounts paid to state and local governments. These include city, county and state transfer taxes, recordation fees, and prepaid property taxes.
• Costs of getting a mortgage. These include title insurance, survey, appraisals, credit checks, loan origination and documentation fees, commitment and processing fees, hazard and mortgage insurance and interest prepayments.

Recording and Transfer Charges: A small fee (to $50 to $150) to cover the cost of the paperwork required to record your home purchase. Documentary stamp tax on the mortgage varies from state to state and about 35 cents per $100 borrowed.

Interim interest: Accrued interest from closing date until the end of the month.

Lender's and Buyer's Attorney: This fee (to $500 to $1500) is to pay for preparing and reviewing all of the documents needed to close your loan.

Discount and Origination Points: Points are equal to a percent of the loan amount. 1.75 points is equal to 1.75% of the loan amount. Discount points represent additional money you can pay to the lender at closing. If you pay more points it will lower the interest rate. Usually, for each point you pay for a 30-year loan, your interest rate is reduced by about 1/8th (or .125) of a percentage point.

Origination Points (or Loan origination fee) charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan. Origination fees are often expressed as a percentage. A one percent loan origination fee is equal to 1% of the loan amount. Some lenders add origination points into their quoted points while other lenders add an origination point in addition to their quoted points.

Application Fee covers the lender's cost to process the information on your loan. Some lenders may apply the cost of the application fee to certain closing costs but generally, this charge is paid at the time you file the application.

Appraisal Fee is determined by the price of the home (ranges from $150 to $500). The lender requires this estimate of the market value of the house in determining how much of a mortgage the bank or mortgage company will approve.

PMI (Private Mortgage Insurance) is mandatory if your down payment is less than 20% of the purchase price. All monies brought to the closing must be certified funds or a cashier' check made payable to yourself (no personal checks or cash). The certified funds are endorsed to the closing agent. The closing agent will collect and then disperse all funds.