My wife and I are in the process of buying a home, and I have been frustrated lately at the hidden mortgage fees that brokers try to pass off as “necessary” to close the loan. When in fact, there are so many fees that don’t need to be paid by borrowers with good credit and stable income.
Here are list of some of the negotiable fees in a closing statement:
- Discount Points: This is basically pre-paid interest, and it DOES help the borrower, because it pays down the interest rate. Basically, it’s pre-paid interest. However, you aren’t required to pay discount points. It’s just an option that you have as a borrower. However, the lender wins if you don’t stay in the home long enough to break even on the pre-paid interest. Typically, if you aren’t planning on staying in the home for five years or longer, don’t pay discount points.
- Origination Fees: This is another form of pre-paid interest that ONLY benefits the mortgage broker. You will see this fee if you use a broker using a processor. They’ll try to get you to fatten the profit they make on the loan by paying this fee. This fee is definitely negotiable, and there are many brokers that will do a loan 0 origination fees. However, if you are a high risk borrower with bad credit and undocumented income, you may need to pay this fee. The broker/processor will need to do much more work to get your loan approved.
- Admin/Underwriting Fees: If you’re going through a broker, you shouldn’t need to pay this fee, because the broker isn’t doing any underwriting on your loan. The lender offering the loan is doing the underwriting. So, if you get a loan through a bank that underwrites your own loans, this fee might be warranted.
- Application Fee: I just think this is ticky-tack. Brokers and banks get credit reports for next to nothing, because they are ordering these things every day. Charging you $50 for an application fee is just another way to increase their bottom line.
- Appraisal Fee: This fee is necessary, but make sure it’s not an exorbitant amount. The fee should range from $200 to $400 for the broker/bank associate to order an appraisal on the house. Also, you are entitled to a copy of the appraisal, because YOU purchased it.
Fees That Are Non-Negotiable:
- Title Fees: There are title fees associated with every loan that is closed, whether it’s an attorney or a title company. But, you can shop around for title companies to see who has the cheapest fees. Generally, they don’t differ too much.
- Doc Stamps/Courier Fees: These are fees that everyone pays to close a home.
- Tax-related service fees
- Title Insurance
- Recording Fees
It’s very easy to get ripped off by lenders and brokers. They think that you know nothing about closing real estate, so they’ll try to throw in extra fees here and there to increase the profit they make on the loan. Be a responsible consumer and scrutinize the good faith estimate as much as possible.