When you inquire with a mortgage lender for a new home loan they usually prepare a "Good Faith Estimate" of closing costs. Although mortgage lenders are only required to mail a copy to you within three business days of application a smart consumer should always request a copy faxed or emailed before submitting an application since this estimate will provide you with a written verification of the fees you were quoted by the lending specialist.

It is important to note that just because the lender is the one who prepares the estimate, not all closing costs are charged by the lender.The lender is only preparing an estimate of the costs you may incur when buying or refinancing and is not required to list all potential costs nor does the lender know what all the costs are actually going to be.The estimate is an educated guess based on past experience. Some things will get left out. Always anticipate the actual third party costs (such as title, appraisal, recording fees) are going to be more than the estimate.

When comparing lenders, please do not look at the total cost. Only compare the costs actually charged by each lender. Both lenders are only estimating third party charges and some lenders may even habitually underestimate just to convince consumers they are cheaper.

Below is a detailed description of costs you may have to pay when you buy or refinance your home.

There are two main categories of closing costs.

•  Non-Recurring closing costs are items that are paid once and you never pay again.

•  Recurring closing costs are items you pay time and again over the course of home ownership, such as property taxes and homeowner's insurance.  

Please remember that all of the items below do not always appear on a lender's good faith estimate so you should ask your loan specialist about all these fees before you apply.

Loan Origination Fee—The loan origination fee is often referred to as points. One point is equal to one percent of the mortgage loan. As a rule, if you are willing to pay more in points, you will get a lower interest rate.

Discount Points—Any points in addition to the loan origination fee are called discount points.

Appraisal Fee—Appraisal fees vary depending on the state, type of property and home value. Unique and more expensive homes usually have a higher appraisal fee. Additionally, appraisal fees on VA and FHA loans are higher than on conventional loans because they require the appraiser to inspect items not strictly associated with value.

Credit Report—As part of the underwriting review, your mortgage lender is required to review your credit history. The credit report fee can range from $7 to $60 or higher depending upon the type of credit report required by the lender.

Lender's Inspection Fee—You normally find this on new construction and is associated with what is called a 442 inspection. Since the property is not finished when the initial appraisal is completed, the 442 inspection verifies that construction is complete before you close on your loan.

Mortgage Broker Fee—Almost 75% of all mortgage loans are originated through mortgage brokers and they will sometimes list your points in this area instead of under Loan Origination Fee. They may also add in any broker processing fees in this area. The purpose is so that you clearly understand how much is being charged by the wholesale lender and how much is charged by the broker. Wholesale lenders offer lower costs/rates to mortgage brokers than you can obtain directly, so you are not paying "extra" by going through a mortgage broker.

Tax Service Fee—Independent service fee charged by the lender to monitor property tax payments regardless of whether or not you escrow taxes in your monthly payment or pay them separately throughout the year. This fee usually runs between $70 and $100.

Flood Certification Fee—Your lender must determine whether or not your property is located in a federally designated flood zone.