Your monthly payments go partly to repay your loan and partly to pay the fees for your loan, many of them relating to the closing, or settlement. Most lenders require an up-front application fee to cover their expenses as they approve you.
Additionally, lenders charge a loan origination fee. It's generally expressed as a single point (a point is defined as 1 percent of your loan amount). For example, if you were borrowing $100,000, your loan origination point would be $1,000 ($100,000 X 1%).
The typical fees, charges and expenses that cover the loan processing and closing are:
Lender Fees:
- Origination fee
- Appraisal fee
- Credit report
- Inspection fee (newly constructed homes only)
- Underwriting fee
- Document preparation/review fee
- Tax service fee
- Mortgage insurance
Title charges:
- Attorney's fees
- Title insurance
- Transfer tax (excludes refinances)
- Recording tax
Miscellaneous Charges:
- Property survey
- Termite inspection
Prepaid expenses (not part of the actual cost of the loan, but included with payment):
- Prepaid interest (interest that accrues between closing and the end of the closing month - paid in advance)
- Homeowner's insurance
- Real estate taxes
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