You know you're supposed to avoid "junk" fees when you get a mortgage but junk fees can be hard to spot.
Many fees are legitimate although lenders can play games with fees and the interest rates they charge. One might offer a rate slightly lower than the competition but jack up the fees. Another may advertise a "no cost" mortgage, with those fees built into a higher rate.
The best way to shop for a mortgage is to apply with a few lenders and compare their good-faith estimates on similar loans. Shopping around can be expensive (some charge up to $500 and some charge none) but the potential savings may make paying the charges worthwhile.
Here are some fees to compare:
ORIGINATION FEES
Lenders may chop these up into different categories and call them by various names: commitment fees, application fees, processing fees, underwriting fees. The names don't matter as much as what it costs, which should be in the "A" box on Page 2 of the good-faith estimate.
You're likely to pay more in some states than others, although NC rated one of the lowest in the country for these fees.
Some origination fees are calculated by "points," or a percentage of the loan you pay to lower the interest rate. Paying points can make sense if you're going to be in the home, and keep the loan, for many years. But make sure that you are comparing the origination costs of “like” loans to get an accurate comparison.
APPRAISAL FEES
Lenders hire appraisers to evaluate your property's value. Appraisal fees typically range from $225 to $750, depending on the value of the property. If the lender is proposing to charge more, you should find out why.
Lenders are not supposed to mark up third-party services, which include appraisals, credit reports, settlement fees, flood certifications, pest inspections, surveys and title work. But keep in mind that lenders also don't have to choose the most economical providers which may be passed down to you.
CREDIT REPORT FEES
Lenders have to pay for pulling your credit reports and scores. Lenders typically pay less than what you would so these fees should be very reasonable. If you're being charged much more $25, you should ask why.
Your credit scores shouldn’t be penalized for applying at different mortgage lenders. The formula lenders use lumps all mortgage-related inquiries made within 45 days together. Furthermore, the scoring formula ignores all inquiries made within the previous 30 days.
TITLE INSURANCE AND RELATED SERVICES
A title insurer researches your property to make sure there aren't any problems involving the deed. There are two kinds of title insurance: lender's policies, which protect the lender and are usually part of the mortgage deal, and owner's policies, which protect you and may not be required.
A Bankrate survey showed that title costs averaged $993 in NORTH CAROLINA but $2,811 in New York state.
COURIER, POSTAGE AND WIRE-TRANSFER FEES
A lender should be open to reducing or waiving these fees if they're being charged as part of the origination costs. A Bankrate survey found that postage and courier costs typically average $55 to $75.
Finally, to make sure there are no last-minute surprises, ask your lender to give you a form called a HUD-1 at least 24 hours before your loan is scheduled to close. This form lists all the fees you'll be charged and should closely match the good-faith estimate you were given at the start.
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