Friday, July 6, 2007

Home Buying Series Part IV: Avoiding Junk Fees on Your Mortgage

When you go to get a loan your mortgage broker should give you a good faith estimate before you agree to go with them for the loan. This estimate tells you your rate and lists a number of other fees. What many people don't know is that many of these fees are highly negotiable. The fees usually don't represent anything specific but actually cover your mortgage broker's overhead. Especially if you are already agreeing to paying any "points" you should definitely not pay much more in the way of junk fees.

Here is a list of common expenses on the good faith estimate that are widely viewed as "junk fees":

  • Processing Fee
  • Underwriting Fee
  • Document Prep Fee
  • Settlement Fee
  • Bank Inspection Fee
  • Lenders Inspection Fee
  • Application Fee

"Real" fees typically include title fees, government recording fees, an appraisal fee (you should get a copy of the 3rd party appraisal).

Now it should be made known that you probably cannot get all junk fees to go away, but when you are comparing lenders don't look at the amount of the different fees, just sum them up and view the total junk fees as a point of comparison. See if you can negotiate these total junk fees down, it doesn't matter which specific ones go away. You will likely get some song and dance about how they do have to process your application, etc. but don't budge. Junk fees are a direct cost to you and the lower they go the better off you are. Play two lenders off each other on the junk fees and get them way down especially if they are offering essentially the same interest rate.

1 comment:

Super Saver said...

Good series on buying a house. In the two times that I've bought a house, I find the emotional component becomes a large part, no matter how rational I try to be.

By the way, I have tagged your blog. See the URL for more details. Enjoy!