Loan-Related Closing Costs

Loan Origination Fee
This fee is supposed to cover the administrative expenses involved in setting up and processing the loan. The loan origination fee may be a flat amount or a percentage of the mortgage amount.

Points (optional)
As a home buyer you may have the option to pay "points" to lower your interest rate. Each point equals 1 percent of the mortgage amount. For example: on a $150,000 loan, 1 point would equal $1,500. Pay that up front and your interest rate is lowered. Pay more now to save potentially a lot more later.

Appraisal Fee
Your lender orders the appraisal and is the "owner" of the appraisal report. But that doesn't mean they won't make you pay for it -- either up front when your application is submitted or as part of closing costs. (Often, you have a right to a copy of your report.)

Credit Report
The lender uses your credit history to determine your willingness to pay back a debt. (Your income and debt statements are telling the lender about your ability to repay.) The fee for running your credit report is often paid when your loan application is submitted.

Interest Payment
Don't be surprised if you're made to pay interest on the mortgage loan covering the time between the closing date and when your first mortgage payment period begins. For example: If closing is on October 15, your first monthly payment begins to accrue interest on November 1 with your first mortgage payment due December 1. At closing an interest payment covering the period between October 15 and October 31 may be required.

Escrow Account
At closing a payment may be required to fund an escrow account if the lender is paying home insurance, property taxes and/or other expenses on your behalf out of the escrow account.