Ask Mike! »  Closing Costs

Q: Why do I have to pay closing costs?

A: Closing costs are the expenses associated with putting a loan together. These include fees for the appraisal, title insurance, credit report and escrow. Also, the lender or broker will have fees for their services such as an origination fee and processing fee. All of the services are necessary to complete a loan. In most refinance transactions, closing costs are included in the loan. In purchases, they can be shared by the seller and buyer.

"No fee" or "free" loans still require all of the same services. The source of income to pay the service providers will come from a substantially higher interest rate and a prepayment penalty. What is "free" at the time the loan is made will be pay for over the life of the loan or when the loan pays off.