on your situation, the following costs for getting a mortgage
must be paid at or by closing. These costs cover items that
were part of the loan application process:
The loan origination fee covers the administrative costs
of processing the loan. It may be expressed as a percentage
of the loan (for example, 1 percent of the mortgage amount).
Loan discount points are the dollar amount paid to a lender
for making a loan. Each point equals 1 percent of the mortgage
amount. For example, if you take out a $100,000 loan, one
point equals $1,000. The more points you are willing and
able to pay at closing, the lower your interest rate should
The appraisal fee pays for the appraisal, which the lender
uses to determine whether the value of the property is sufficient
to secure the loan should you default on the loan. This
is usually paid by you when you apply for the mortgage and
may appear on the settlement form as "POC," or "paid outside
The credit report fee covers the cost of the credit report,
which the lender uses to determine your creditworthiness.
You probably also paid this fee when you applied for the
mortgage, so it may appear on the settlement form as POC.
An assumption fee is charged if you take over the payments
on the seller's existing loan. The fee may range from several
hundred dollars to 1 percent of the loan amount.
Interest is the fee you are charged for borrowing money
from your lender. You will probably have to pay the interest
on the mortgage from the date of settlement to the beginning
of the period covered by the first monthly mortgage payment.
For example, suppose you settle on February 10. Your first
monthly payment begins to accrue on March 1 and will be
payable at the beginning of April. At closing you may be
required to prepay the interest for the period from February
10 through the end of February. This means that if you settle
later in the month, your closing costs will be less than
if you settle early in the month.
Escrow accounts (or reserves) will be required if your lender
will be paying your homeowner's insurance and property taxes.
Your lender sets up the escrow account by adding the cost
of the insurance policy and taxes to your monthly mortgage
payments. That portion of your payments is kept in reserve
until the bills are due. Each year, the bills will be sent
directly to your lender, who will make the payment for you.