Closing costs and settlement charges

Closing costs and settlement charges usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing usually are about 3 percent to 6 percent of the mortgage amount.

You should be given a breakdown of all of your closing costs and settlement charges through a form called a Good Faith Estimate, also referred to as a GFE. A GFE should be provided to you within 3 days of mortgage application. If you do not receive a GFE then you should contact your mortgage professional and demand one.

If you are only planning on being in your new loan for a year or two, a no closing costs loan with the associated slightly higher interest rate might be a good option. However, if think you may be holding on to your loan for 5 or more years, you may want to pay closing costs up front as the lower interest rate will result in savings over time.

You may have to pay additional fees other than the traditional closing costs such as debts in order to make your loan debt to income ratios fall below the particular guidlines for your loan program

The bank fee portion of the closing costs are included in the calculation of the true finance costs of the loan. The true cost is expressed in terms of the Annual Percentage Rate (APR), which is often found in the Truth In Lending Disclosure form the bank mails to loan applicants. Because bank fees are included in the APR, do not be alarmed the APR on the disclosure is higher than the interest rate that is used to calculate your monthly payment.

Some lenders offer "no closing cost" options. Although it sounds attractive, the interest rate you pay for this privelage is higher, and this often outweighs the savings in closing costs.