Mortgage Loan-Related Closing Costs

Loan Origination Fee (aka Points)
This covers the agents administrative expenses in setting-up and processing the loan. The loan origination fee may be a percentage or "points" of the mortgage amount. Each point equals 1 percent of the mortgage amount. For example: on a $150,000 loan, 1 point would equal $1,500.

Appraisal Fee
This fee is for having the house appraised to determine it's current value. It may be incorporated into the closing costs or payment may be required upfront by the lender at the time the loan application is submitted. It's often and usually paid by the buyer or owner in the case of a refinance.

Credit Report
The lender uses a credit report to determine the creditworthiness of the loan applicant. This fee is often paid when the loan application is submitted, but more often included in the costs at closing.

Interest Payment (aka Pre-Paid Interest)
Typically the buyer is required to pay interest on the mortgage loan to cover the time between the closing date and when the first mortgage payment period begins. For example: If closing is on May 15. Your first monthly payment begins to accrue interest on June 1 through June 30 with your first mortgage payment due July 1. At close of escrow an interest payment covering the accrual period between May 15 and May 31 will be required. Thus, your payment due on July 1st will be an equal 1 month's payment.

Note: All mortgage loan payments are for the previous month's interest. Unlike rents, they are for the currents month's occupancy.

Escrow Account (aka Impound Account)
This is the account established at closing. It's often required on any loan where the downpayment is less than 20%. It is where you may be required to deposit funds to setup the account and have reserves in for the lender to pay the Taxes and Insurance.At closing a payment may be required to fund the escrow account if the lender is paying home insurance, property taxes and/or other expenses out of the escrow account.

For more Information on these terms and more related terms, see the Glossary on my home page.