Closing Costs Affect Home Mortgage Rates

By: Alan Lim

Closing Costs Affecting Home Mortgage Rates

First time home buyers or borrowers are often rather unpleasantly surprised at the time of closing or just prior when the good faith estimate of closing costs is received.? These closing costs can sometime add a significant cost to the dollar amount that the borrower is expected to provide to clear the escrow account at the time of closing or shortly thereafter. The home loan rate is not directly tied to each of the closing costs, but indirectly, you will pay the closing costs. You should make sure you realize and understand each of these costs and how they impact your total cost of the loan.

Definitions

?'Closing costs' is just one of the definitions that you should understand when considering obtaining a home loan.? The 'home loan rate' is another.

Closing costs are expenses related to the obtaining of the loan, such as document preparation, title search, appraisals, and various other expenses.? These costs are typically listed as part of the closing process on the loan.? The closing of the mortgage at the title company or with the loan officer will spell out each of these costs and who is responsible for payment of the cost at closing.

Title search

One of the responsibilities that must be met is a search by a title company of court records to insure that the ownership or title to the home in question is clear.? They will be looking at sales and deed records to determine that the sellers actually have the legal authority to sell the property. , but in most cases are negotiable also that fact is not commonly known.

Points

The borrower may be required to pay 'points' as part of the loan fees.? There are two types of points that you may be asked to cover.? Origination points are the fees you pay your broker or lender to secure the loan while discount points are essentially interest that you prepay in order to manage the best interest rates on your loan.? Both types of points are usually paid at the home of closing.? Payment of the discount points can significantly lower your home mortgage rates meaning thousands of dollars less in cost over the life of the loan.

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