Typically, you either finance or you do not finance the closing costs based on customer wishes. If they want to pay them in cash, they typically pay them at closing, unless you have a requirement for some fees upfront, such as the appraisal and/or credit report.
I personally detest the practice of automatically including the costs in the loan amount without consulting with the borrower.
My opinion only. Not legal advice.
Say you'll haunt me - Stone Sour