Understanding Your Loan Cost

By Debbie Wilson
LoanPage.com Columnist

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If you're looking to obtain a new home loan, you might be surprised to discover the dollar amount and variance of loan costs levied by today's mortgage lenders. But since the charges you pay will vary greatly from lender to lender, it pays to shop around for the best combination of mortgage terms and loan costs.

Application fee -- This is typically a flat fee (approximately $75-$300) to process your mortgage application. It may, however, also include monies to obtain your credit report and document preparation fees.

Points -- Depending upon your loan, you may pay points, which equal 1% of the mortgage amount borrowed.

Appraisal fee -- Since lenders want to make sure your potential property is worth at least as much as the mortgage, they will hire a professional property appraiser to compare the value of your home to others in the neighborhood. Typical fees run $200 - $400.

Title search -- Your new home loan lender will want to ensure that the seller owns the property free and clear of any "encumbrances", such as liens, prior to closing. He or she may also recommend that you purchase title insurance to protect yourself if a flaw in the title becomes apparent after purchase. Costs for these services are approximately $450 - $600.

Prepaid interests -- Interest charges start the minute you purchase your new home loan even though your first mortgage payment might not be due for 6-8 weeks after closing.

Private Mortgage Insurance/hazard insurance -- These loan costs may or may not apply to you, depending upon how much money you put down, your specific new home loan requirements, and your long-term financial situation. The P.M.I. can vary from .5% to 1%, with hazard insurance running $300 - $600.

In addition to these aforementioned loan costs, you may also be required to pay attorney fees, real estate commissions, and other local and state government fees and taxes. Your best bet is to do your research upfront, know the facts, and ensure that you get the new home loan that is right for you, without all the surprises of hidden loan costs.

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About the Author
Debbie Wilson owns and operates a lakeside resort. Her previous experience includes profitability consulting for a national healthcare company. Debbie holds a B.A. in Business Management with a minor in Physical Education.

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