If you are in the process of buying a home, you've likely heard that you need to save a lot of money to pay for the costs associated with your loan. However, it's important to know what those costs are so that they make sense to you when the time comes to pay them.
Earnest Money
One of the first things that you'll need to have cash on hand for is earnest money. This is the money that you give to the seller when you sign a contract that shows that you are committed to buying the home. If you were to walk away from the sale and break your contract, you would not get this earnest money back. This is a way to compensate for the seller's time if you do walk away from the sale since they may be paying for the mortgage and property taxes during the time.
Application And Origination Fees
Many lenders will charge you a fee for simply applying for a loan. This is a cost that will be paid at the time of the closing if you follow through with the sale, but it is to compensate the lender for their time spent starting the loan process. In addition, there will be an origination fee that is paid at closing, which covers the administration costs associated with processing your loan. If you do not have an application fee, it will certainly be made up for in the form of higher origination fees.
Rate Lock Fees
Are you happy with your interest rate and are worried that your rates will go up by the time you close on your home? This may happen if your home doesn't close within a 15 or 60 day window, which gives the lender the opportunity to change your mortgage interest rate to the current rate. Paying a rate lock fee will lock your mortgage into the original interest rate, which gives you peace of mind if you have a far-away closing date or you think rates will go up before then.
Appraisal Fees
An appraisal is required by your mortgage lender to move forward with the sale, and this is not something that they throw in for free. You're required to pay for the appraisal as part of your closing costs, which is the money spent for a neutral party to visit your home and identify how much it is actually worth. This will determine how much a lender will give you for a loan as well.
Contact a local mortgage company near you to learn more.
Share11 October 2021
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