Mortgage Fees

Mortgage fees are often confusing and vary from lender to lender. Although most fee’s are legitimate, trying to determine what you should and shouldn’t pay, which fees to avoid, and which are actually considered illegal can be quite daunting.

The best advice? Shop around for a broker who is up-front about all fee’s and gives you the best deal you can find. If you have shopped around and still need help figuring it all out,
find a person to be on your side, an advocate, to make sure you are not incurring any unnecessary fees.

Generally Unavoidable, Legal, and Fair Mortgage Fee’s

1. Origination Fee – The cost of the mortgage broker’s services. Fee ranges from 1%-2%, 2% being reserved for very complex loans.

2. Appraisal Fee – Helps determine the market value of a property, and must be performed by a licensed professional. This fee is generally not more than $400.

3. Processing Fee – Sometimes required if a 3rd party is involved in processing the loan – generally no more than $400.

4. Credit Report - Usually around $20 per borrower if the lender was charged a fee to obtain the credit report.

5. Admin Fee or Underwriting Fee – Be sure to ask what is included in this fee. Brokers are generally not the entity underwriting your file, so if the broker is trying to charge you an underwriting fee, be sure to get a clear understanding of the reasoning behind it.

Mark-up’s to 3rd party fees are illegal and considered a breach of the Real Estate Settlement Procedures Act or RESPA. Areas where breach is generally found include:

1. Credit Report
2. Appraisal
3. Inspections
4. Title Fees
5. Closing Costs
6. Postage Fees

Some Fees, while they may not be illegal, are best avoided altogether. These types of fees, usually cleverly disguised with creative names, include:

1. Pre-Payment Penalty
2. Loan Review Fee
3. Warehousing Fee

If a broker describes to you a fee of 1%-2% (generally called points) of the mortgage, be sure to verify how much your interest rate will be reduced.

There should be a direct correlation between the addition of points and interest rate reductions. Only pay a loan fee of this nature if you think you will be in the home 10 years or more.

You can help yourself and your advocate become familiar with the deal before closing day by requesting a list of all final costs. This allows any issues to be resolved or questions to be answered to ensure a smoother closing day. In the end, if a last-minute fee shows up that you are not comfortable with, you have every right not to complete the loan signing or to attempt to negotiate for removal of the fee.

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