Boston Home Buyer's Guide Tip of the Month Massachusetts

Besides the Down Payment, What Money Do You Need?

Additionally, there are costs called closing costs. These include an origination fee (usually 1% of the loan amount), the appraisal fee, and a credit report (the lender has to get their own--they can't use the one you obtained). Additionally there is a fee for the property survey, title search, title insurance, attorney's or closing agent's fees, recording, and miscellaneous lender fees. This will be approximately 1.6-1.8% of the loan amount.

The loan you chose may have discount point(s). Points are prepaid interest on a mortgage charged by the lender at closing and affect the interest rate; the more discount points you pay, the lower the interest rate. One discount point is 1% of the loan. If, for example, you select a loan that requires 1 discount point, your closing costs will go up by 1%. Discount point(s) are tax deductible in the year you pay them as long as you pay them in cash and do not pay with proceeds of your loan. To insure deductibility, pay the points with a separate check on an account that clearly hasn't been established with loan proceeds.

A common negotiating strategy is to try to get the seller to pay part or all your closing costs and discount point(s).

You will pay prepaids at closing. These include interest on the loan from the day you take ownership through the end of the month as well as several months of your homeowner's insurance, property taxes, and mortgage insurance (if applicable). Mortgage insurance is something required on loans with less than 20% down payment.

The lender will compute both your monthly payment, closing costs, and prepaids and give it to you in writing.