These include fees for loan origination, document preparation, escrow, title insurance, credit reporting, document recording, pest inspection, appraisals, surveys, commissions, legal fees, insurance and property taxes. Closing costs are always negotiable. There are no hard and fast rules about these fees or about who pays them. Lenders often use a term called points to describe the loan origination fee, which can be one of the major closing costs. One point is equal to one percent of the loan amount.
Points become part of the principal which has to be repaid over the term of the loan.
Borrowers can often decrease or buy down the interest rate by paying more points. The final value at the end of a conventional mortgage term is usually zero, meaning the loan has been paid in full. However, some loans call for a balloon payment at the end, where the borrower has to pay a lump sum. When sellers finance a real estate loan, they often make it a short-term loan with a balloon payment at the end, giving the buyer time to establish good credit and refinance with a conventional loan. Once you know the term, interest rate, principal and final value, you can calculate the monthly payment.