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Without understanding the nature of lender
fees, it is difficult to know whether you are being hit with excessive
costs. We’ll take you behind the scenes of some of the industry’s
best-kept secrets.
There are some things we can easily understand about
a mortgage: we can understand the interest rate, for example,
we have national averages, we know exactly what ours is and we
understand how it is affected by our credit score. Other things,
such as lender fees can be somewhat more of an obscurity. A recent
Wall Street Journal Online article attempted to debunk some of
the mystery surrounding such fees. With total lender fees ranging
from less than $2,000 to over $11,000, it is probably best to
understand what you are getting into, and whether or not such
fees are excessive. A good rule of thumb is that if you have excellent
credit, you shouldn’t expect to pay more than $3,500 to
$4,000 in lender fees.
Opponents of lender fees argue that with the market
as it is right now, lenders shouldn’t be charging borrowers
to become their customers. Advocates of lender fees take a slightly
different approach; they say that because first mortgages are
so large, the lenders themselves are taking on a lot of risk,
so the loans require a lot of documentation, the cost of which
get transferred onto the customer.
So what are the different fees out there, what should
you be expecting to pay for fees and are they reasonable? We’ve
broken out the most common fees below:
|
Fee Type
|
Average
Charged
|
Negotiability
|
|
Administration fee
|
$350
|
Consider disputing if this
is charged in addition to origination points
|
|
Application fee
|
$200-250
|
Consider disputing if it
isn’t refundable and is charged on top of origination points
|
|
Commitment fee
|
$500
|
Not considerable leeway on
negotiating
|
|
Document-preparation fee
|
$200
|
Definitely consider
negotiating
|
|
Funding fee
|
$225
|
Not considerable leeway on negotiating
|
|
Mortgage broker fee
|
$850
|
Considered negotiable if
the broker receives a "yield spread premium" from the lender, a
percentage of the loan interest rate you're charged
|
|
Processing fee
|
$325
|
Definitely consider
negotiating
|
|
Tax service fee
|
$75
|
Not considerable leeway on
negotiating
|
|
Underwriting fee
|
$275
|
Not considerable leeway on
negotiating
|
|
Wire transfer fee
|
$25-50
|
Definitely consider
negotiating
|
|
Appraisal fee
|
$350
|
No negotiating
|
|
Attorney fee
|
$450
|
Negotiate if attorney is
not necessary
|
|
Credit report fee
|
$25-50
|
Definitely consider
negotiating
|
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Flood certification fee
|
$10-20
|
No negotiating
|
|
Pest-inspection fee
|
$50-75
|
Not considerable leeway on
negotiating
|
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Postage/courier fees
|
$50
|
Definitely consider
negotiating
|
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Survey fee
|
$175
|
No negotiating
|
|
Title insurance
|
$650
|
Consider comparison
shopping
|
|
Title work fee
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$200
|
No negotiating
|
|
Recording fee
|
$75-100
|
No negotiating
|
Recording fee $75-100 No negotiating
Now you have a better idea of the type of fees out
there, and whether or not they are negotiable, what are you going
to do about it? Here are some strategies that you should make
sure you employ:
• Make sure there are no mistakes in your
credit, and that your credit score is as high as you are able
to make it.
• Make it clear upfront what fees you will
not be willing to pay for.
• Obtain a revised good-faith estimate each
time you agree to make fee reductions.
• Use your legal right to obtain a copy of
your finalized HUD-1 form, the summary of your total loan-settlement
fees, at least 24 hours before closing.
• Dispute fees as soon as possible; never
wait until closing.
By understanding exactly what you are being
charged, you are in a far superior position to know whether you
are right on the money, or whether there are a couple of additional
fees thrown in that are not necessary.
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