It’s easy to get overwhelmed when you’re trying to successfully navigate the mortgage lending process, but our team at Harbor Mortgage Company is here to help. One of the most important things to know before you get started is that there are a variety of costs associated with the mortgage lending process. Being prepared for these costs can help you avoid unpleasant surprises come closing time, so let’s break down the primary costs associated with obtaining a mortgage.
- Closing Costs – Your closing costs typically range between 2 and 5% of the loan amount. These costs are part of the mortgage lending agreement and include various fees, such as origination fees, underwriting fees, and processing fees.
- Appraisal Fees – Before they approve your loan, your lenders will require an appraisal to determine the home’s market value. Appraisal fees can run anywhere from $300 to $700, depending on the property size and location. An appraisal is a key step in mortgage lending that helps ensure the loan amount doesn’t exceed the property’s value.
- Title Insurance & Title Search Fees – Title insurance will protect the lender and the borrower from potential disputes over property ownership, and the title search ensures there are no claims against the property. Together, these fees can range from a few hundred dollars to over a thousand, depending on the property’s value.
- Prepaid Expenses – These include costs that are paid upfront, such as property taxes and homeowners insurance. Lenders will often ask you to set up an escrow account, where a portion of the prepaid expenses is collected monthly and held until they are due.
- Private Mortgage Insurance (PMI) – If you have a downpayment that is less than 20%, you will likely need PMI. This protects the lender if you default, and the cost is typically added to your monthly mortgage payment.
By budgeting for associated costs with mortgage lending, you can make informed financial decisions and enjoy a smoother mortgage process. Reach out to our team today if you’d like to learn more about the mortgage lending process or are ready to start exploring your options.