Home Loan Guidance Topics

High-Level Overview of Home Loan Costs


Save on Upfront Loan Costs and Closing Fees



When you get your home loan, there are many upfront fees. The more you can reduce these fees without increasing your interest rate or affecting your ability to refinance, the better. You pay some of these fees during the loan process and most of the fees at "closing." The fees include closing costs, origination fees, points, discount points, and others that we will explain. The "closing" is the specific point in time when the loan becomes yours and you become responsible for paying it back. This transaction often takes place at what is called the "closing table."

Fees and closing costs can vary from state to state, and there is a lot of leeway in what the lenders and mortgage brokers can charge you. The lenders are the companies that actually loan you money. Mortgage brokers are middlemen, people that match you up with the lenders and take you through the whole loan process, managing your information with the lender.

You may have heard an argument that the more you reduce upfront fees, the more you pay in interest later. This is not always true. There are many cases where you can reduce closing costs without increasing your future interest rate. On the other hand, there are ways to pay more upfront and save in monthly interest payments later. Sometimes this makes sense to do.

If you have no idea what you're being charged for fees and place your trust in a mortgage broker or lender, it is very easy for them to slip in hundreds of dollars of extra fees. Those fees end up directly in the mortgage broker's pocket, above and beyond a generous commission they can make from your loan. Mortgage brokers actually get paid by the lender for bringing you to them as a broker. There is no need for the mortgage broker to charge you directly for their services.

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