Most loans have fees in addition to the total amount you are borrowing to ﬁnance your home. You can sometimes borrow the money needed to cover these fees, but that will obviously increase the overall amount of debt you undertake. Some fees are paid up front, and others are not due until closing.
The lender or broker can charge you points on your mortgage. One point equals 1 percent of the loan amount. These are simply fees paid to the lender or broker that are often linked to the interest rate, and are usually paid in cash to the lender or broker at closing. A lender may oﬀer you a lower interest rate, but charge more points, so it’s important to compare oﬀers.
Loan Origination Fees
The institution that actually loans you the money will generally charge on origination fee for processing the loan. They are often expressed as a percentage of the amount of the loan.
Certain lenders will charge a fee to investigate your creditworthiness and determine if you are likely to repay your loan.
Typically paid at closing, a mortgage broker may charge you a fee in addition to the origination fee. If you are working with a broker, be sure to check with them what their fee is.
Transaction / Settlement / Closing Costs
These fees lump together several charges for: application fees, title examination, abstract of title, title insurance, property survey fees, deed preparing fees, other mortgage fees and settlement documents, attorney fees, recording fees, notary fees, appraisal fees and credit report fees. The Real Estate Settlement Procedures Act requires that a lending institution provide a borrower with a good faith estimate of closing costs at the time of application. This estimate must list each expected cost as a range or as an exact amount where applicable.
Never hesitate to question a fee that you don’t understand. Your lender should give you a thorough explanation and make sure that you know what you’re paying for.
For better understanding, ask your broker or lender to quote you a dollar amount – rather than just a number – on any points you are being charged on the loan.
Sometimes lenders lump fees together. You can ask for a break down of that lump.
Certain fees, like the broker’s fee or the amount of points assessed on a loan are negotiable. It never hurts to ask your lender if they can get you a better deal.