Mortgage lender

There are way too many fees that you will find associated with a home loan mortgage and some of the fees can be termed as being junk fee. These junk fees are unnecessary fees and can be avoided in most cases. The brokers or lenders put in these fees to increase their commissions and make more profit. For the borrower, questioning such fees is a must and if they feel it is unjustified then they can even ask for these fees to be removed from the list.

The first fee that you must check for is the loan origination fee, which is charged by the lender for his professional work of delivering a timely and good quality service to you. Loans requiring more time and effort may make this fee rise higher. You can try to compare it with the origination fee being charged by a few other lenders fro similar service or you can consult a mortgage specialist to find out if it is reasonable, if not then you need to talk to your lender about it.

There are certain fees that would remain constant throughout the lenders such as the title fee, recording fee, prepaid interest, taxes, attorneys fee etc. property tax and the homeowners insurance are prepaid fees and the lender or broker have no control over these. What you must be careful to check are the fees that are meant for the lender. You can find out these fees contained in the good faith estimate provided to you by the lender.

To get a more specific idea about the cost of the mortgage, the homeowners insurance and the property taxes must not be included in the closing cost as these are already prepaid. This will give you the exact cost of the mortgage. In case you realize that you have been overcharged after having closed the mortgage, you can still ask the lender to refund you the excessive amount.

There are numerous ads today talking about no fee mortgages, but all of these may not be trust worthy. The fees in such cases may be in a disguised form like higher interest, high prepayment penalty or high margins. So you need to be more evaluative about the overall costs checking the terms of the mortgage thoroughly. Any confusion that may arise can be cleared out with a reliable mortgage professional.

The most important source of information on the fees aspect of a particular home loan is the good faith estimate (GFE), which is provided by the lender. Now we will take a look on how to use this document for the evaluation purpose.

The GFE contains all the relevant information about the mortgage like the rate of interest, the term of loan, the amount of loan and the details and split-up of all the settlement costs related to the loan. And as per the federal law the borrower must be provided with a GFE within three days of his loan application. The fees on the document are listed under three main headings

Rate of interest and discount points

Fixed dollar loan fee and

Third party charges.

The unreliable lenders can easily use figures under each of these categories to trick the borrower, as the lender cannot be held liable for errors in this document as per law. Still it is the most evaluative tool and the lender can easily withdraw his loan application if he finds that there is too much of a difference when comparing it with the final settlement document. Anyways, we shall right now just try to understand how to read a GFE.

The fees related to the lender service, broker and for the appraisal of the property are listed in section 800 of the GFE. Sections 900 to 1300 contain the third party fees and of this the title fee can be found under section 1100.

From the comparison point of view the fees listed under section 800 are the most relevant, as these are the ones which will vary across different brokers or lenders. The remaining sections will remain the same, irrespective of the lender of broker. So you must simply concentrate only on the section 800.

When reading the GFE you will find some letters at the end of each fee listed under section 800 these are:

PFC: this refers to prepaid finance charges which are used in the calculation of annual percent rate(APR)

S: these are charges that are to be paid by the seller at the time of closing.

F: these charges are allowed by the Federal Housing Authority (FHA)

POC: these charges are supposed to be outside of the closing costs such as appraisal fee, premium for homeowners insurance and any dues to be paid to the homeowners association. The borrower must maintain a copy of the GFE to compare it with the final settlement documents, before putting his signatures on the loan documents. The GFE is also known as a mortgage loan disclosure statement (MLDS), if it is prepared by the broker and not the original lender.

Collect the GFEs from all lenders and then go for an item wise comparison. In cases of major differences you may ask the specific lenders for a clarification on the unusually high prices.

The fee listed in the GFE may vary from the fees listed in the final settlement document for reasons like the time of the month when you plan to close, in the earlier days of the month the closing cost is high as the lender will charge the interest on the mortgage from the day of closing to the last day of the month. The other reasons could be that you changed your homeowners insurance, a fee charged for an appraisal carried out by an outside firm and any changes made by you with regards to the term and amount of loan.

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