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How
are Closing Costs
Determined?
Your
closing costs can depend on
certain factors including:
the type of loan you are
getting, the loan amount,
your credit scores, the loan
to value, and which lender
you are working with.
For
example, a purchase or
refinance loan can cost more
than a home equity loan, and
a credit line will cost less
than a home equity loan. As
the loan amount increases,
so does the cost. Higher
credit scores can provide
lower costs. A lower loan to
value can mean lower costs.
Recurring
costs are not attributed to
the lender. They are ongoing
costs, such as hazard
insurance, property taxes,
pre-paid interest, or
mortgage insurance, which is
normally required on a
purchase or refinance loan
over 80% loan to value, and
does not apply to a home
equity loan.
Having an impound account
for taxes and insurance
means the lender collects a
pre-paid amount at closing
to establish the account,
and then your monthly
payment will include taxes
and insurance.
An impound account only
applies to a first mortgage,
and is not required for a
home equity loan. Also,
mortgage insurance is not
required for an equity loan,
regardless of the loan to
value.
Pre-paid interest is not
considered a closing cost
because it is part of your
normal mortgage payment, but
prorated, or collected in
advance. It is based on the
day of the month of your
loan closing, because your
mortgage payment always pays
the interest from the
previous month.
Non-recurring
costs are fees paid one time
only to a lender or third
parties who are involved in
your transaction. They can
include, loan processing,
underwriting, loan
documents, credit report,
appraisal, tax service,
flood certification,
courier, loan origination,
or points.
All
lenders are required to give
you an estimated closing
statement, or good faith
estimate, as part of the
loan process. You can even
request one before starting
the loan process.
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