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Closing Costs

When you apply for a loan your lender is required by law to give you a Truth-in-Lending estimate of your closing costs. This estimate is based on local practices as well as the sales agreement with the seller. Both the buyer and the seller are responsible for portions of the closing costs. Some of the costs depends on where you live and the local custom as to who pays what. The majority of the fees are in relation to the loan where the lender charges certain fees for giving you a mortgage. The RESPA (Real Estate Settlement Procedure Act) HUD-1 Statement outlines who pays what and a copy is given to the buyer at the end of the closing for his/her records. The RESPA HUD-1 is signed by the buyer, seller and closing agent. RESPA is governed by the Department of Housing and Urban development (HUD). This act was passed to help the buyer and seller and ensure an ethical transaction. There will also be costs outside the closing. These are referred to as considered payments outside closing (POC). Some general questions in regards to closing are outlined below.

Questions About Costs
What will a loan cost?top^

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. But, Avtek Mortgage doesn't. That's right - with us, it's free to apply!

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 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
What are the costs that are included in my loan payment?top^

At the least, your loan payment will consist of the principal and interest for one month. In some states, you may elect to have your insurance and taxes prorated and added onto the monthly cost. In other states, it may be required that you pay for insurance taxes as part of your monthly loan payment. This money would be placed in an impound or escrow account by the lender.

Will I have to pay any loan fees if I apply online?top^

Avtek Mortgage fees are the same regardless of application method.

What are the appraisal costs?top^

For all first mortgages, Avtek Mortgage pays the appraisal cost and doesn't charge you until your loan closes. Avtek Mortgage will hire the appraiser. Most lenders pass this cost on to you immediately. The appraisal determines the value of the property in question, which becomes a prime factor in determining the loan-to-value (LTV) ratio (the amount of your loan divided by the value of your property). Your LTV is important because it determines your equity in the property.

What closing costs will I pay?top^

Avtek Mortgage offers loans with and without closing costs, depending upon what type of loan you want and the amount of money you are borrowing.

What does rolling in these fees mean?top^

Avtek Mortgage gives you the option of rolling these funds into your loan amount. This allows you to get your loan with no out-of-pocket expense, but your loan amount will be slightly higher. The alternative to rolling the costs into your loan is to provide these funds yourself when the loan closes. You'll be borrowing a smaller loan than with a roll-in, but you will incur immediate out-of-pocket expenses.

Copyright 2007 Avtek Mortgage, LLC. All Right Reserved.
An Equal Housing Opportunity Lender.