Understanding Mortgage Loan Fees

As a mortgage broker , I am often asked by mortgage “shoppers” to provide a Good Faith Estimate of settlement charges. I am proud to say that the Good Faith Estimates that I provide very closely match the settlement statement at closing. A Good Faith Estimate cannot be exact, because some settlement charges, such as prepaid interest, are calculated based on the number of days left in the month when the loan closes.

However, not all loan originators provide accurate Good Faith Estimates. Some conveniently omit certain fees to make you think you are getting a better deal. With that in mind, I have decided to write a series of articles explaining the typical fees you can expect to see on a Good Faith Estimate.

Settlement charges are grouped into sections: lender fees, title related fees, government fees/taxes and prepaid charges. This article will focus on the lender fees. These are fees associated with the cost of processing and underwriting your loan.

Here is what you can expect to see:

Loan origination fee: this is how the loan officer or mortgage broker is compensated. This fee is split with the broker’s company to cover their overhead costs.

Broker fee:same as above.If you see both a broker fee and a loan origination fee, this is just a sales tactic to break up the commission so it looks smaller

Discount points: A percentage of the loan amount, usually 1-2%. Points are used to buy the rate down. This is not a commission paid to the loan originator-this fee is paid to the lending institution. Since this is a form of interest paid in advance, it is usually tax deductible. Verify this with your tax planner.

Application fee: This is not a standard fee. Some companies do charge this fee to cover some expenses in case you decide to pull out of the loan for any reason. It is usually refunded at closing. If it is not refunded at closing, it is a junk fee in my opinion.

Administrative fee:This is usually another junk fee. Companies with very high overhead may charge this fee to cover expenses.

Processing fee: Covers the salary of the processor who submits your loan to the underwriter and handles the file through closing. A good processor is worth their weight in gold and is invaluable in navigating through the many glitches that can come up.

Underwriting fee: This is a 3rd party fee charged by the lender for underwriting your loan. Not a junk fee.

Yield Spread Premium: Commission paid to the originating company from the lender. this should be disclosed as a dollar amount or a specific percentage, not a range of 1-3%.

Appraisal fee: Fee paid to the appraiser for completing the appraisal.

Credit Report fee:Fee that the mortgage company is charged for ordering your credit report.

Flood Cert fee: covers the cost of certifying whether or not your property is in a flood zone.

Tax Service fee: covers the cost of servicing your escrow account.

Information brought to you by The South Florida Mortgage Lady http://www.floridamortgageconsultant.blogspot.com

Second opinion on Good Faith Estimates provided with no obligation.