Closing costs vary by region, but generally including flat fees (unrelated to the size of the purchase) and fees scaled to the sales price or mortgage amount.

Among the scaled fees are transfer taxes (a percentage of the house value) and perhaps prepaid property taxes. Those have nothing to do with whether you have loan or not--they are a percentage of the purchase price. Others, such as loan points, are related to the size of the mortgage.

Let's say a mortgage carries 1 point. That's one percent of the load amount. So one point on a 100K loan is $1,000. One point on a 500K loan is 5,000.

Mortgage companies require title insurance to protect them in case someone comes up with a lien or disputes the ownership of the property. IMHO, anyone making a purchase of this size should get owner's title insurance as well to protect themselves.

You need an experienced buyers agent to guide you through a home purchase.

Closing costs come along with a mortgage or more accurately I suppose a loan?

There are basically two types of closing costs. Those related to the purchase (aka transaction) and those related to borrowing any money to facilitate the transaction.

Those related to the transaction are charged whether you are taking out a loan or not. Examples include title insurance, property taxes, transfer taxes, attorneys' fees, agents'commissions, certain other types of insurance. Some of these charges will be a fixed fee, others based on a percentage of the sales price. Some of these fees are charged by the title company and some by the state/local authority.

The second set of closing costs are those related to taking out a loan. The appraisal fee (which is usually a fixed charge - say $350)and the origination fees (aka points - which is based on the amount of the loan. Each point is 1% of the loan amount).

Seems like a lot of the closing costs come from the title company - and you have to do that anyway? I.e. why are loan closing costs a big deal?

Most people finance their home purchases by borrowing the money. It costs money to borrow money. The largest cost of borrowing money is, of course, interest determined by the interest rate. The other big cost of borrowing is the origination fee, aka points. It's a big deal because it is a one-time charge based on the amount borrowed. So, it's variable. A point is 1% of the loan amount. If I'm buying a $500,000 house, borrowing 100%, and paying 1 point, it's going to cost me $5000 (just drop the last two zeroes on the loan amount.)If I put down 50% and finance $250,000, the point will cost me $2500.

Some borrowers find it advantageous to "buy down" their interest rate. They might pay 2 points or more to purchase a lower interest rate over the life of the loan. Other borrowers might pay zero points and buy a slightly higher interest rate. Lenders will often tie interest rates and points together as a marketing tool to stand out against their competition. So, depending on the amount financed and the number of points charged, this particular cost of borrowing money can make or break the loan for a potential buyer.

And do mortgage related closing costs go up with the amount of the loan? How why?

Some do, some don't - see above. Why? 'Cuz. (LOL)

Then depending on the last, only buying a house full price/cash is an advantage? A hefty downpayment and smaller loan gets you (no)where?

Not necessarily. Sadly, Mary, this is where the math becomes really important. But a good mortgage calculator with a full amortization schedule can be a big help. It will calculate not only the monthly payment but the total interest cost of the loan (prepare for heart failure) and enable you to model different interest rate, loan amount, and payment scenarios. Stop thinking of it as math and start thinking of it as money...playing with money.

So when people talk closing costs - are we talking two types? The type you pay no matter what - say you bought full purchase price - or even inherited a house. And the ones that come along with a loan? Which are loan ones and which are not?

Yup...see above. Mary, the best way to understand the total transaction costs of a real estate purchase is to take out your settlement statement from you recent home sale. This is called the HUD-1. Then go to HUD's website and follow the line-by-line explanation of what each settlement line means. You'll see right away that the form is divided into loan costs and other costs. Doing this is akin to doing your taxes by hand. Despite the miracle of tax software, you will never understand our tax system better (and how it applies to you) than after you've done your taxes with paper, pencil, and a good tax manual. Something, each taxpayer should do at least ONCE in their lifetime. Same goes for the HUD-1. It's work but it's good work.

Hope that helps. The concepts, guidelines, and rules-of-thumb are important but no piece of generic advice will ever replace working the numbers specific to YOUR situation, your financial needs, your psychology, and your future situation.

Mary, I know how much you want to buy a home versus renting. You love "home" - it's a passion, a hobby, and a lifestyle for you. You also want a secure financial future and you have doubts about how these two fit together right now. I think it's great that you keep asking questions and seeking answers. I read that you had engaged a financial planner. As you review your decisions, you might want to start a new hobby - getting past math anxiety by learning more about consumer finances and financial planning. The math is such a small part of it. It's much more a process of thinking and mindset. You might want to see if your local county or community college offers financial education classes. It's a great way to meet people who have similar interests and it can become downright addictive. Fifteen years ago, I didn't know there was such a thing as a financial calculator...now, I carry one with me all the time. Playing with mortgage scenarios, calculating investment earnings, etc. is a great way to pass time while waiting in lines...sort of like having your own financial game-boy. Good luck!

Many places also have recording fees & taxes based on the value of the property and the mortgage or deed of trust.
A common name for the deed fee is a GrantorÂs tax".
Sellers usually pay it not buyers though.
The buyer often pays a Ârecording fee for the loan instrument (mortgage or deed of trust) based on its value.
The reason I think you need a Buyers Agent is that a mortgage IS a loan (secured by real property), and most homes use Deeds of Trust.
To foreclose a mortgage normally requires court action.
To foreclose a Deed of Trust requires only that the trustee follow the terms already outlined I the Deed of Trust.

Mary,

A mortgage is NOT a loan. The mortgage is a document that places a lien on real property & is commonly used to secure a Promissory Note.

Not all mortgages must go through the court system for foreclosure. Some states allow for statutory foreclosure...CT is one of those states.

States that use a Deed of Trust: Alaska, Mississippi, North Carolina, Arizona, Missouri, Virginia, California, Nevada, & Washington DC.

States that use a Mortgage: Alabama, Louisiana, North Dakota, Arkansas, Maine, Ohio, Connecticut, Massachusetts, Oregon, Delaware, Michigan, Pennsylvania, Florida, Minnesota, Rhode Island, Hawaii, New Hampshire, South Carolina, Indiana, New Jersey, Vermont, Kansas, New Mexico, Wisconsin, Kentucky, & New York.

States that use both Deeds of Trust and Mortgages: Colorado, Montana, Texas, Idaho, Nebraska, Utah, Illinois, Oklahoma, Wyoming, Iowa, Oregon, Washington, Maryland, Tennessee, & West Virginia.

Georgia uses a Security Deed.

Mary, it used to be that the Origination Fee was called just that...Origination Fee. The term "Points" was used just in reference to whether the interest rate was being lowered during the loan's amortization period by front loading (prepaying) one or two...or, sometimes, even three "Points" (One Point = 1%). Today, however, the use of the word, "Point", has become generic & is also used to describe what is really the Origination Fee. Using "Point" to describe both types of charges is confusing to many borrowers & makes it more difficult to compare one lender's charges to another's. So, always ask about the "Points". Ask if they include an Origination Fee &, if so, how much?

/tricia

Mary,

I just re-read my post & I wasn't clear about a mortgage...sorry. It is the Promissory Note that creates a 'loan'...not the Mortgage. The Mortgage just creates a lien on a piece of real property that is used by the lender as security that the Promissory Note will be paid.

Non-industry people often use the two terms interchangeably. Within a bank though...I might say something like, "I need to run an amortization schedule on this Note for Mr. & Mrs. Jones." I would not say, "I need to run an amortization schedule on this Mortgage for Mr. & Mrs. Jones." The second sentence doesn't make any sense.

The Note is the more important of the two documents. If I, as a lender, lose a Mortgage or Deed of Trust I can order a certified copy from the recorder's office. If I lose a Promissory Note I'm SOL &, probably, fired for cause.

After your Note has been paid & you receive the original from the lender marked "Paid In Full" you should keep that Note in a safe place. In case, for some reason, a Release of Lien is never recorded you can prove the Mortgage is no longer valid as the Note it references has been paid.

Also, as just another thought...

You can receive a Release of Lien (releases a mortgage) without paying off a Note. That happens with frequency. Lenders switch collateral around all the time. The Note is the important document.

/tricia

I guess what I'm trying to figure out here are 2 things.

Given that if I buy I will lose money

1) how do I best limit the amount of money lost?

besides the obvious clean up my credit score and get a good rate.

I'm trying to wend my way between the above scenario's because there are so many freaking trade-offs and things to consider, many unknowns.

Really this is a something everyone is trying to do right?

Brickeeye - some of the paperwork sure, my big picture finances? Uh, not.

Given a rather dead midwestern town that is not really going to get any better, flat appreciation etc. What would you do? Put down every bit of equity and cash you have minus a cash reserve? 20% and invest the rest? I don' plan on being here more than 10 years I hope. I will be selling 10 (slight chance of sooner) so no shouldn't be worrying about buying down points. ?

Is poins the only thing I can really affect?

There really doesn't seem to be a simple or even any answer to this. But I can't even seem to settle on "the better of what there is"