There are a number of costs you need to understand when you decide to get a home loan. Costs include closing costs, loan discount fees and prepaid items; however, if you’re lucky, some sellers of the home may agree to cover some of the expenses for you.

Expenses that the lender charges borrowers for a new home is called the closing costs, though some of these fees may be a part of your application for loan, and others involve appraisal of the home. Average cost for the closing costs is about 3% however each state has various costs which are different from other states. Loan discount fees are the interest that is prepaid. This fee is payable at the closing and will be charged to the borrower as the interest. Loan discount fees are measured in points, which mean one discount point is equal to the percentage of the amount borrowed. Prepaid item is the last expense you will pay. Lenders require borrowers to set up an escrow account (savings account held by lenders) before doing any transactions. You can check local lenders to get more information about such fees involved.