Closing cost explained

The term "Closing Costs" , in a home loan or mortgage refinancing are not specific to a particular transaction. No matter what type of transaction, they will be charged no matter what form they take.

Many banks and other mortgage companies and lenders like to roll these costs into higher interest rates and tell their customer "NO CLOSING COSTS". It simply doesn’t work that way.

The closing costs apply to any home loan or mortgage refinancing as a : Foreigner , Foreign national ,Visa holder and US citizen. When you are willing to purchase a property in the USA, you have to keep in mind those closing costs.

As a conclusion , a borrower should always have the asset to cover the down payment plus the closing costs of the loan or mortgage!

The following is a very comprehensive list of standard closing costs :

Loan origination fee : charged by the mortgage company to the borrower to obtain the loan Appraisal fee : charged to obtain an accurate value of the property Credit report fee Tax service fee : fee charged by the county to allow the lender to pay your taxes Underwriting fee : fee charged by the lender "underwriter" Courier fee : Fed Ex or UPS to the lender and title company Mortgage broker fee : fee charged for the company’s work (can be waived, but interest rate could be higher). It is generally cheaper to pay this fee in front rather than amortize it over 30 years Survey / Pest inspection Fees from the title company : usually "title search and abstract" ...etc Why do the borrower has to pay prepaid items at closing ?

The answer is simple, besides the regular mortgage closing costs mentionned above, the borrower will have to pay "Prepaid Items" . Most of the prepaid item are usually reduced with a down payment of 20% or more...

Prepaid, are usually:

Real Estate Taxes : the lender will generally require at least 3 months of property reserve, the borrower will be required to pay taxes up through the closing date. But this will be offset by the amount paid by the seller.If the borrower purchases a property, by the end of the year (for instance closing in September), the lender will ask to put in escrow all the taxes from January to September plus 2 months in reserve as a security. Keep in mind that at the closing date the seller will refund the borrower the taxes from january to September. Building Maintenance fees Insurance Interest pre-paid : the interest paid from the day of closing to the first day of the following month.betwen 15 to 25 days Mortgage Insurance : reserve required by the lender if the down payment is less than 20%

Most of the mortgage lenders , will decide to escrow from 2 to 13 months of each of those prepaid...