Mortgage Fees Explained
Most home loans have a number of associated fees and ongoing costs. Most of these fees come in the process of actually obtaining a mortgage such as credit checks, survey fees, underwriting fees, and loan origination fees. Some of these fees must be paid in advance, while others are required to be paid when the borrower closes on the property and typically total 3-5% percent of the value of the property being purchased.
The Good Faith Estimate that will be sent to you by your lender will express all of your closing costs in detail. The following are some of the popular fees that you should expect:
Loan Origination Fee: Fees charged by a lender to cover fees involved in preparing, submitting, and evaluating an applicant’s loan. This fee is typically equal to about one percent of the value of the loan; however, in some cases it might be as high as two percent depending on the complexity and type of your loan.
Brokerage Fee: A brokerage fee is only applicable if you use a mortgage broker rather than working directly with a lender.
Mortgage Underwriting Fee: This fee covers your lender’s underwriting, closing and funding costs. This is where most lenders make their immediate profit from. Note that Brokers should not charge an underwriting fee as they are not the ones underwriting your loan.
Prepaid Interest: This is the interest that accrues between closing time and the date of the first mortgage payment. This fee is paid to the lender at the closing date so you should try to close at the end of the month to reduce the amount of cash you need to come up with.
Survey Fee: The lender or title search company may require that your property be surveyed to determine the property’s official boundaries. This is to ensure that the boundaries are exact and that they have been upheld.
Title Insurance: Title Insurance is taken to protect the buyer in case there are any unpaid mortgages or tax liens against the property that might have been overlooked during the title search. In the event that any title issues appear in the future, title insurance pays for your legal costs and will reimburse you for any losses you may incur.
Title Search Fee: A fee used to pay for title search on the property to ensure that the person selling it is its rightful owner.
