Points (optional)
Points are pre-paid interest that you give to the lender in return for them giving you a lower interest rate. One point is 1% of the loan amount so if you are borrowing $200,000, then 1 point is $2,000. What you typically get for each point is a 1/4% reduction in the mortgage interest rate. When we calculate whether it’s worth doing that or not, in most cases we see the payback taking 6 years. So you first have to ask yourself if you will be in the home that long and if the answer is no, then don’t pay points. Also, if you are close to being able to cross the 20% down point, do that instead because you are required to have PMI insurance (that’s Private Mortgage Insurance) if you put less than 20% down.
Appraisal Fee
Lenders will order an appraisal and you as the Buyer have to pay for that. The appraisal will need to support the purchase price.
Credit Report
Your lender will order a credit report and that will provide them with your credit history along with your credit score which determines your mortgage eligibility and your interest rate.
Interest Payment
When you close on your mortgage, you will pay interest from the day of closing to the day of your 1st mortgage payment.
Escrow Account
Your lender will typically create an escrow account so that you have funds available to pay your property taxes in January and July along with your homeowner’s insurance policy when it comes up for renewal. Most lenders want to have 3 months of reserves in that account and they will adjust the escrow portion of your mortgage payment as needed. When you sell you property, you will be glad to know that you’ll get a check from your lender for the funds that are in your escrow account after your mortgage is paid off and your home is sold.