You probably know how much down payment is required to buy the property, but that's not the only portion of your closing expenses that will go to the lender on the day you sign the loan documents. Other lender-related closing costs will be estimated on your GFE.

Some lenders charge borrowers a loan origination fee. It's usually referred to as costing one or more points, an amount that's equal to 1 percent of a loan amount. For instance, one point for a $100,000 loan equals $1,000. Not all lenders charge an origination fee.

Your lender will probably charge an application fee. This fee covers their costs of processing your application from beginning to end, and this might be called a processing fee or an underwriting fee. It might include prepayment for the appraisal the lender requires to evaluate the property you are buying.

A document preparation fee is another closing expense that lenders charge. As its name suggests, it covers the costs of preparing your loan documents.

Discount points are optional fees paid to the lender at closing in order to lower your interest rate. Each discount point you buy on a thirty-year loan typically lowers the interest rate by 0.125 percent. That means a 6.5-percent rate would be lowered to 6.375 if you purchase one discount point.

Like the origination fee, each discount point costs one percent of the loan amount — or a point. Buying points can be a good choice for properties you plan to keep for awhile, but they aren't helpful for properties you intend to sell quickly. Do the math to find out if points make sense for your transaction:

• Calculate the amount of your monthly payment at the interest rate you will be charged if you do not pay points.

• Calculate the amount of your monthly payment to reflect the payment you'll make if you do purchase points.

• Deduct the lower payment from the higher payment to find the amount saved each month.

• Divide the amount you would pay for points, $1,000 in our example, by the monthly amount saved. The result is the number of months you must keep the loan to break even on paying points.

Here's an example:

$100,000 Loan on a 30-Year Term

That's nine years. Do you plan to keep the property that long? If not, save your cash and forget the points.

Can the Seller Pay Points?

Talk with your lender, because the seller might be allowed to pay for your points. The seller might want a higher sales price if she agrees to give back closing funds, so you'll have to analyze your total costs to decide if a seller contribution makes sense.