How to Find a Home Loan One Can Roll a Closing Cost Into

Financing closing costs is possible--but you will likely face higher fees for the service.

Closing costs on a home include origination fees, discount fees, attorney fees, appraisal costs, credit report fees, processing fees, recording fees and title fees. In many cases lenders will ask you to bring a check to the closing to cover these fees (which can often total well over $1,000). However, it is possible to get a home loan lender to roll these fees into the mortgage itself. You'll need to do some research to find one of these lenders.

Things You'll Need

• Income documents (W-2s, pay stubs)
• Homeowners insurance declaration page
• Property tax bill

Instructions

1. Find the estimated value of your home first. You can also conduct a full appraisal, but this will likely cost you at least $200 and possibly as much as $500. Find the estimated value using an online valuation site (like Zillow, see Resources).

2. Calculate the equity in your home. To do this, you need to know what the balance of the new home loan will be. For example, say the estimated value of your home is $200,000 and you need a loan for $180,000. Your remaining equity is $20,000. The closing costs will be deducted from this amount.

3. Research finance companies (like Wells Fargo Financial and CitiFinancial) and mortgage brokers. Local banks and credit unions usually do not allow customers to roll closing costs into home loans.

4. Call a few prospective lenders and ask about rolling fees into their loans. Next ask for some literature discussing their mortgage programs. Some lenders only offer this service with certain mortgage products. Do not compromise your mortgage goals simply to get this service.

5. Fill out applications with no more than three mortgage lenders who roll fees into loans. Excessive applications may negatively impact your credit. Choose a mortgage lender based on the options offered from these applications.

6. Review the final terms of the mortgage loan. Pay close attention to the fees. Once an application is reviewed by a lender's underwriting department, some terms may change. You must make sure the final approved loan is as financially beneficial as the original offer.

Tips & Warnings

• Weigh the benefits of rolling closing costs into the loan versus paying the fees up-front. In most cases, it makes more financial sense to pay up front. If you roll the fees into the loan, you will pay interest on those fees for the entire term of the loan (as much as 30 years).

References

• Bankrate: Refinance Closing Cost Options
• Bankrate: How Rolling Refinancing Costs into a Loan Helps Lower Payments

Resources

• Zillow: Online Property Valuation