Unexpected Mortgage Loan Costs and What They Mean for You and Your New Home

by Anna Borgstede
Jan 17, 2023

You may be aware that many types of mortgage loans require a down payment. But what you might not realize is that there could be thousands of dollars in additional costs required when obtaining a loan. While saving for a down payment, you’ll want to also save for those unexpected closing costs, as well.

Person Signing Stack of Papers

Note: Click here to read more about what to consider before buying a home.

Fortunately, if you’re looking to purchase a home, regulations have tightened in recent years. Mortgage lenders are now required to disclose these additional costs in loan estimates. Here are two types of unexpected mortgage loan costs to look out for (and factor into your savings plan):

Two Types of Closing Costs

Lender Fees

Lenders can have many costs associated with processing your loan. These include things like pulling your credit, pulling a flood determination, tracking your property insurance and property taxes, not to mention paying the manpower, and more! To cover these costs and to make a profit, they charge lender fees. You may see them displayed on your Loan Estimate as:
  • Loan Origination
  • Processing Fee
  • Underwriting Fee
  • Documentation Fee
  • Credit Report
  • Flood Certificate
  • Tax Tracking

NOTE: Lenders cannot legally charge over 3% of your total loan amount for these fees.


 Third-Party Fees

Lenders require the help of different vendors to complete the loan process. An appraisal is required to ensure the property is worth the value they’re lending. A title company and/or attorney is required to provide clear title work and act as the settlement agent for the loan closing. Some types of loans require property inspections. Additionally, many lenders require a borrower to escrow taxes and insurance in their monthly payment, so an escrow cushion is collected at closing. All these costs add up quickly.  You may see them listed on your loan estimate as:

  • Title Abstract
  • Title Exam
  • Lender’s Title Insurance
  • Appraisal
  • Home Inspection
  • Pest Inspection
  • Recording Fee
  • 2 months escrow for property taxes
  • 2 months escrow for homeowners’ insurance

In some cases, your lender may also require you to pay the first year’s insurance premium in full, in addition to setting up your escrow.

NOTE: Most fees charged are specific to your property, its location, the lender, and the title company you choose to use.

If you are looking to buy a home this year, be sure to factor these extra costs into your budget or savings plan. Make sure to review your loan estimate and always feel free to ask your lender any questions.

You can read more about mortgage loans here and use this checklist as a guide to start collecting items you’ll need throughout the home-buying process.

Contact a First Guaranty Bank’s Mortgage Loan Originator today to help make your home buying experience a breeze.

First Guaranty Bank is an Equal Housing Lender. Member FDIC. NMLS #643809.

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