Closing Costs - Understanding Mortgage Lender Settlement Fees - part 2
by Anthony Kirlew
Commitment Fee ($200 - 1% +): This is often a junk fee, especially if a processing fee and a underwriting fee are charged. I know of one reputable lender that uses this word synonymously with the underwriting fee. You should always ask what the fee covers; if your loan officer doesn't know immediately, or has to "check with someone", that is a sign that you may want to move on either because the fee is bogus, or the loan officer doesn't know his or her job. Bottom line here is two points:
1. If you are paying a commitment fee along with an underwriting fee AND a processing fee, this is most likely pure profit to the company and can be negotiated out.
2. The higher the commitment fee is, the more it should cover. For example if a company charges a 1% commitment fee, I would not expect to see many other lender fees.
Application fees ($300-$595): Application fees often cover items such as appraisal costs, and may be charged up front so the lender does not get stuck with the cost of an appraisal (should you cancel your transaction). Application fees may also be charged in conjunction with sub prime loans when additional services (such as credit repair assistance) are needed. Some companies charge an up front application fee to ensure that the borrower doesn't go elsewhere and this is a legitimate business practice. In a case where all other fees are charged (appraisal, processing, and underwriting), this fee can be negotiated out.
Discount points (1% of loan amount): A Discount Point should be used to reduce the interest rate. The bank either makes its money up front in fees or on the rate charged.
Loan Lock Fees ($any): This is a pretty bogus fee. There is not need to pay a fee to lock your loan other than an application fee.
Broker Fee ($any): Broker Fees are often charged by brokers to arrange for mortgage financing. The idea is that if you are using a broker, they should be looking out for your best interest and would charge you fees up front to find you a "less than market rate". If a broker fee is charged, an origination fee would normally not need to be charged
Some Fees are Paid Up Front, but beware of how much money you spend with your lender in advance. It is common for a lender to collect some or part of the following fees up front:
· Application Fee · Appraisal Fee · Credit Report Fee
Now that you are armed with this information, you will be a more educated mortgage customer and should not overpay for your next mortgage.
If you would like a personal consultation from me or a member of my staff, please feel free to contact me at 1-800-757-9704 or info@atozlender.com
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