What costs will I have to pay as part of taking out a mortgage loan?
There are several different kinds of costs you pay when taking out a mortgage. Some of these costs are directly related to the mortgage – collectively, they make up the price of borrowing money. These costs are the ones you should focus on when choosing a mortgage. Other costs, such as property taxes, are often paid with your mortgage, but they’re really costs of homeownership. You would have to pay them whether or not you had a mortgage.
Monthly costs. Your monthly payment will typically contain four elements: Principal. This is the money you borrowed and have to pay back. This is part of the cost of buying your home, but not a cost of borrowing money. Interest. This is the primary cost of borrowing money, but not the only one.
Mortgage insurance. This is an additional cost of borrowing money, typically required for borrowers who make a down payment of less than 20%. Property taxes and homeowners’ insurance. In addition, you may pay for condominium or homeowner’s association dues. These costs are usually paid separately from your monthly payment.
Upfront costs. Common charges are labeled origination fees, application fees, underwriting fees, processing fees, administrative fees, etc.
Third-party closing costs. These are charges for third-party services that are required to get a mortgage, such as appraisals and title insurance. You can shop separately for some of these services.
Taxes and government fees. These fees are charged by your local government. They are charged in connection with the real estate transaction, but are usually not a cost of borrowing money.
Prepaid expenses and deposits. These expenses may be associated with your loan or with homeownership. Typically, you need to pay the interest on your loan between the time you close and the end of that month. It’s also common to pay the first year’s homeowner’s insurance premium and make initial deposits into an escrow account to cover future homeowner’s insurance and property taxes.
All info should be verified by a professional, prior
to commencement of any transaction. 2023.
Source: CFBP - Consumer Financial Protection Bureau
https://www.consumerfinance.gov/ask-cfpb/what-costs-will-i-have-to-pay-as-part-of-taking-out-a-mortgage-loan-en-153/
