Whether buying a first home or refinancing an existing home loan,
you have to be prepared to pay some fees that add to the price
of the house. Some mortgage fees are standard
and almost every bank will charge more or less the same.
Others can differ quite a lot among lenders, so it’s better
to know what they are when shopping for a mortgage.
Mortgage application fee.
Most banks will charge a small fee for processing a mortgage
application, checking your credit
score and the initial evaluation of your credit worthiness.
Mortgage origination fee.
This fee covers the bank’s cost of preparing the mortgage
Each time the bank lends money for buying real estate it will
require a fair assessment of the market value of the property
Title insurance and title search fees.
Before lending money for a property purchase, the lenders will
want to examine the public records for the property. The title
insurance covers potential discrepancies in the public record
which would put the bank at a loss, if any, up to the policy maximum.
Often it is cheaper to buy the policy from the insurance company
that issued the last policy.
Fees paid to the lender.
These fees are usually high, and they cover the cost of attorneys,
escrow companies and real estate brokers who provide services
to the mortgage company.
The lender will profit not only from mortgage interest paid
over the years. Most will also require you to pay points, which
equal one percent of the mortgage amount.
The number of points depends on the mortgage type and the competition
Mortgage prepayment fees.
The prepayment fee is a penalty that a bank imposes on you when
you pay off the mortgage earlier. These fees are limited in a
number of states, and are not allowed in some types of mortgages,
including VA loans and FHA loans.
There are also lenders who charge a full month's interest if
you pay off the mortgage. It’s best to be aware of mortgage
prepayment fees (which can be negotiable in many cases), before
committing to a home
loan, as you are likely to refinance.
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With some types of loans you will also have to pay the VA mortgage
guarantee, FAH mortgage or private mortgage insurance, and other
Mortgage fees to watch out for.
Some banks feed off consumers with less than perfect credit
and offer mortgages on very bad terms. Exercise caution when a
lender is doing any of the following:
1. Up front mortgage fees that are above the normal market
2. A negative amortization where the monthly mortgage payment
is less than the actual interest. This will, over time, increase
the principal amount of the mortgage.
3. A mandatory arbitration fee in case there’s a problem
between you and the lender
4. A balloon payment which requires you to pay a large amount
at the end of the loan.
See also: home
purchase mistakes, refinancing
home loans, home
and taxes, new
Related topics: FHA