Mortgage Closing Costs.

Aside from the principal, interest and taxes, there are also other things you have to pay for at the closing of your mortgage term; these are often legal types of fees that youll have to pay. Here's a short list of where your money is going.

Processing fee
Application fees and fess needed to access your credit reports are included here. These are the fees that the lender would charge you for processing your mortgage loan. Look at these fees when comparing lenders.

Appraisal fee
An appraisal is a direct comparison of the property you are buying, to the costs of other property that are in the same condition as yours. This is done by independent parties/appraisers. This ensures the lender that the property you are applying for a mortgage on is actually worth what youre paying for it.

Discount points
You can buy discount points to lower the interest rate of your mortgage. One discount point equals one interest point. These discount points are payable either at the beginning or at the closing of the mortgage term. Buying points can save you money, on interest fees so consider this when youre looking. Discount points may also be deductible from your federal income tax.

Origination fee
These are for additional work that the lender has to do for your mortgage. This is aside from the Processing fee.

Document preparations fee.
This is the fee for the amount of documents that need to be prepared. This may be included in the Attorneys fee or the Processing fee, or might be on its own. It is usually a flat rate, but can also be a percentage of the mortgage.

Attorney Fees
These fees are something that you and your lender will have to pay. These costs are for attorneys to make sure that your papers are as it should be. The attorney may or ay not be present during the closing. The attorney serves as the middle man and collects all the money, pays for all the fees, gives the deed to the buyer and gives the money to the seller.

Home and Pest inspections
Some lenders require pest test, for termites and other insects to make sure that the house is structurally sound. They may also check the water for quantity and quality.

Homeowners and Hazard insurance.
This insurance protects you and the lenders investment if the house is destroyed.

Private Mortgage insurance (PMI)
This is to protect the lender in case you fail to make your mortgage payments. You need 20-25% equity before you have to stop paying these premiums. Premiums are usually included as a percentage of your entire mortgage.

Surveys
This is only to ensure that there have been no changes to the land since the last survey. This is done by independent surveyors.

Prepaid interest
You may not have to pay your mortgage for at least another month since the closing, but your lender might charge you for prepaid interest counting the days before you initial mortgage payment. You might have to pay this interest up front with the closing costs.

Title Search fees
This ensures that the person owning the house is indeed the owner. A company searches public records like deed.

Title Insurance
If the title company made an error when doing the title search, this protects you as well as the lenders investment on the property.

Closing Taxes
Depending on the state you may be required to pay three to eight months worth of taxes at the closing. You may be able to split these cost with the lender though.

These are all for closing costs, which are fess that you pay for, at the closing of your mortgage, or in plain terms when your mortgage is approved. These may or may not come with the down payment. In addition, most of these charges are flat rates, meaning you can probably save some money in your mortgage if you find lenders who offer lesser fees.