Many times, when we are in the market for a new home we often forget to budget for other costs as part of taking out a mortgage loan. This includes all fees and charges incurred while officially transferring a property from one owner to another.
According to the
Consumer Financial Protection Bureau, when taking out a mortgage there are several different types of costs or fees you will pay. These costs can be directly related to the mortgage, but in the end, they are all a part of becoming a homeowner and having a mortgage. Some of the costs are paid whether or not you have a mortgage or not and are important in deciding how much you can afford, when the time to purchase a new home is on your mind. Learn more about possible fees, charges and mortgage terms that you might come across in your mortgage journey:
What kind of charges can I expect as part of my closing costs? Application fee: Covers all administrative work required to process your application for a home loan.
Appraisal: Covers the fee of a professional appraiser to provide your lender with an estimate of your home's true value.
Closing fee or escrow fee: The cost of the title company, escrow company or attorney for facilitating the closing.
Credit check: Some lenders charge a fee to examine your credit history.
Escrow account: A special financial account for the temporary deposit of funds (like property taxes or homeowners' insurance) before they are paid out at a specified time.
Escrow deposit: You may be asked to make your initial escrow deposit at closing, covering the first two months of property taxes and mortgage insurance payments.
Home inspection: The cost of a professional inspection of your entire home and property.
Interest: The primary cost of borrowing money, but not the only one.
Lender's policy title insurance: This insurance assures the lender that you own the home and the lender's mortgage is valid.
Mortgage Insurance: This is an additional cost of borrowing money, typically required for borrowers who make a down payment of less than 20%.
Origination Fee: These costs are charged by the lender for "originating," or making you the loan. They are part of the price of borrowing money. Different lenders may choose to itemize these costs to varying degrees – it's the overall total that matters.
Prepaid interest: Most lenders require buyers to prepay the interest that will accrue from the day of closing until the date of the first mortgage payment.
Primary Mortgage Insurance (PMI): If you need to pay PMI on your loan, the first month's premium is due at closing.
Principal: This is the money you borrowed and have to pay back. This is part of the cost of buying your home, but not a cost of borrowing money.
Property taxes and homeowners' insurance: These are costs of homeownership, not of borrowing money. They are usually bundled with your monthly payment and managed by a lender through an escrow account.
Title fees: This covers the cost of a title search, in which your lender hires a title company to look for possible legal claims on your property.
Underwriting fee: This fee goes directly to your lender. It covers the cost of researching whether you should be approved for the loan.
Should I choose the "no-closing-costs" option? Before signing up for a no-closing-cost loan, it's important to understand that there's no such thing as a mortgage without closing costs. In a no-closing-costs loan, these fees will generally be rolled into the mortgage. You'll be paying interest on your closing costs throughout the life of the loan. Also, lenders usually raise the interest rates on no-closing-costs mortgages. For more information on mortgages or to apply, check out our
home loans page. 
