Mortgage Financing Costs & Fees

The following is an overview of the fees and other costs associated with getting a home mortgage:

 

Down payment: Your down payment is the money you pay out of pocket towards the total purchase price of your home. When borrowing money to buy a home, you can expect to pay a percentage of the purchase price with your own money, rather than the lender‘s. Different mortgages and loan packages require you make different down payments (ie. 5% or 20%).

 

Monthly payment: The money you pay each month in mortgage payment can be applied to your loan in a number of ways. The payment is usually divided amongst loan principal (the remaining balance on the actual amount borrowed) and interest. However, a wise choice (and sometimes a loan requirement) would be to pay an additional amount each month to go into an escrow account to pay for taxes and insurance.

 

Mortgage insurance: In the case of mortgages for less than 20% of the purchase price of the home, a borrower is usually required to pay some sort of mortgage insurance. Insured home loans enable people to buy homes with smaller down payments than would otherwise be required. The cost of mortgage insurance varies greatly, generally depending on both the down payment amount and the type of loan chosen.

 

The Veterans Administration (VA ) and the Federal Housing Administration (FHA) are two federal government institutions that insure different types of home loans. Borrowers can also turn to sundry private organizations to acquire mortgage insurance.

 

Closing costs: At the time of closing - when you officially, legally take title of the home - certain costs are due, many of which you will be responsible for paying. In general, you can plan to pay an extra 5% on top of your purchase price towards closing costs. Whenever you apply for a loan, the lender is required by law to provide you with an estimate of the closing costs associated with that loan. Items on that estimate may include:

 

* Origination fees - the loans processing costs of processing your loan (such as: appraisal and property);

* Title insurance - often an optional but highly recommended expense that insures you against problems with the title (ie. property liens) undisclosed to you prior to the time of purchase;

* Attorney fees