What are Closing Costs?

Published on September 30th, 2016

When you buy a home or refinance your existing mortgage, there are costs associated with your transaction, called closing costs. In a nutshell, they represent the total amount of money you must pay to close your loan, including lender fees and third-party charges, along with taxes and transfer fees. When you close your loan with vLoan, you may be able roll your fees and costs into your loan.

Is it worth refinancing if I have to pay closing costs?

A good rule of thumb to consider: If you can reduce your monthly mortgage payment enough to get your closing cost back in two years, you should do it. Take advantage, homeowners!

How much are closing costs?

Closing costs depend on the specific loan product you chose. When you get a free rate quote, you can see the closing costs broken down piece by piece.

What exactly am I paying for?

Here you will find an extensive list of everything covered in your closing costs and why:

  • Escrow
    vLoan creates your escrow account to collect property taxes and homeowner’s insurance. The amount of the initial escrow account is aggregated based on when your taxes and homeowner’s insurance come due. You’ll pay into this account monthly through your mortgage payment. vLoan pays those items on your behalf based on due dates.
  • Lender Credit
    When you accept an interest rate that is higher than the par rate (the rate with zero points and zero lender credit), vLoan pays you. That amount is calculated and disclosed as “points,” meaning a percentage of the loan amount. When you accept a lender credit you’ll receive the money up front, but you’ll pay a higher monthly payment than if you chose to pay borrower points.
  • Borrower’s Points
    If you want an interest rate below the base (par) rate, you can pay borrower’s points to obtain that lower interest rate. This is an investment at the beginning of the loan to pay less interest on your mortgage over time. When there are borrower’s points, you’ll get a lower monthly payment, but you’ll have to spend extra money upfront. It’s up to you to decide the tradeoff between lender credit and borrower’s points.
  • Lender Origination Charges
    Our fee for originating the loan.
  • Third-Party Fees
    A lot of people are involved when you buy your dream home or refinance. These additional fees include your appraisal, credit report fee and tax services.
  • Owner’s Title Insurance
    This only applies when you purchase a home. An Owner's Policy is usually issued in the amount of the real estate purchase. It is purchased for a one-time fee at closing and lasts for as long as you have an interest in the property. Only an Owner's Policy protects the buyer should a covered title problem arise.
  • Government Recording and Transfer Charges
    Taxes and other government fees may also apply.

Still have questions about closing costs? Our team at vLoan is waiting to help! Call us at 1-844-77-vLoan or contact@vloan.com. Explore your home buying power and refinancing options with a free rate quote.

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