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Definitions of common fees
Administrative
fee
Most
lenders roll administrative fees into the Lender's processing fee,
but some charge for it separately for internal accounting
reasons. It is not directly tied to any service that they
provide or cost that they incur. It is a flat fee that
typically costs $50 to $100.
Application
fee
Lenders and Brokers may charge an application fee,
it covers the costs associated with the initial processing of your
loan package. application costs are sometimes included into the
processing fee, but some charge for it separately for internal
accounting reasons.
Appraisal
fee
To ensure that the house is
worth at least as much as you are paying for it, lenders hire a
third-party to objectively appraise the property. The fee for
this service is usually between $300 and $1000. The lender will
sometimes physically pay the appraiser at the time of the service,
and then bill you for it at closing.
Broker
fee
This
is the primary way that a broker charges for their service.
Traditional brokers charge between one and three percent of the loan
amount. If a broker says that they don't charge a fee,
they are probably increasing either the interest rate and/or the
Broker processing fee to compensate.
Broker processing
fee
Brokers charge a processing fee to cover the cost
to package the file, submit it to the lender, and help coordinate
the closing of your loan. This cost covers the expense of
processing the file internally or the cost of outsourced
processing. This is a flat fee between $400 and
$500.
Courier
fee
Lenders may use couriers to
deliver documents to the escrow/settlement firm, appraisal company,
title company, or broker. This fee may already be included in the
Lender
administration fee or Processing fee.
Credit report fee
Lenders
require credit reports to determine how well you have been able to
handle financial obligations in the past. Lenders often get credit
reports from more than one bureau, or get a report from a company
that combines credit bureau reports. The lender will usually bill
you $50 to $75 to look into your credit
history.
Flood check/Flood
Certification fee
The lender requires an investigation to determine
if the house is on a flood plain. This will cost you about $15
to $25. If your property is in a flood zone, you will be
required to buy flood insurance. The average annual premium is $300,
but yours will depend on the value of the home.
Lender documentation
preparation fee
Once a mortgage is approved by the underwriter, a
mortgage agreement and other documents must be drafted for closing.
Lenders often have these prepared by an outside firm. The $50
to $250 fee covers this expense, or the cost to do it
in-house.
Lender origination
fee
The lender may charge an origination fee.
Origination fee vs. discount points Origination fees are sometimes
rolled into the discount points. The typical origination fee
is one point, or one percent of the loan amount.
Lender processing
fee
When you send your application to the lender, they
review and process it. This costs them money, and therefore costs
you money, usually between $100 and $300.
Lender underwriting
fee
Underwriting is the process of evaluating your
application to determine your ability to pay your loan back.
Lenders have underwriting departments filled with people who examine
mortgage files all day ( you thought your job was dull).
The
lender charges you a fee between $150 and $675 for this
process.
Tax service
fee
To make sure your property taxes are paid on time,
the lender hires a tax service company to monitor your tax payments.
This is how your lender makes sure the government doesn't sell your
home to pay back taxes. The cost is $20 to $150.
Wire transfer fee
If the lender
has to wire funds to process your mortgage, they'll charge you $10
to $50.
Escrow fees
Depending on what state,
and even what county you are buying in, there are different services
that help manage the process. You'll be charged a fee for
these services, it may be called an escrow fee, a settlement fee or
a closing fee it is basically the same thing.
Escrow officers
An escrow officer
acts as an objective third-party to coordinate exchanges between the
parties. The fee for their services is between $200 and $500,
depending on the sales price of the home.
Escrow instructions
In areas
without standard escrow instructions or sales contracts that include
instructions, a lawyer does it. The lawyer's fee is similar to the
escrow fee. The lawyer or escrow officer details who receives
what, when, and in what sequence. These instructions must be signed
by both the buyer and the seller.
Lender's title
insurance
To insure that the seller has a clear title, a
search is done of the offices of the recorder of deeds, county
clerk, tax assessor and surveyor. There is also a search of legal
rulings
concerning the property and prior owners. Lenders
require that you insure the results by purchasing title insurance to
protect both you and the lender in case the search was wrong and the
seller does not in fact own the house.
Title insurance is
also required for refinances (usually at a reduced rate), since the
new lender will want the same protection from any undiscovered
problem with the title.
Title search
Many counties have
computerized this process, in some areas it is still done by hand.
As a result, costs can vary depending on a property's
location.
Owner's title
insurance
In addition to the lender's title insurance
policy, you are also required to get your own insurance
policy.
Title
insurance
This policy is more expensive than the lender's
policy since it's based on the purchase price (unlike the lender's
policy is based on the loan amount). This is a one-time fee
that is between 0.3% and 0.6% of the purchase price. So for a
$110,000 house, you would pay between $330 and $660.
Recording fees
This pays for recording
documents at the county clerk's office.
Title company document
preparation fee
The title company that does the title
search and holds your policy may charge a $50 to $200 fee to process
and prepare your paperwork.
Prepaid hazard
insurance
The good news is that you won't have any hazard
insurance bills for a while. The bad news is that this is because
lenders usually requires you to pay your hazard insurance at
closing. A year of hazard insurance will cost you between
0.35% and 1% of the loan amount. On a $100,000 house, this is $350
to $1,000.
Prepaid interest
In the time between the
closing date and your first mortgage payment, you will accrue as
much as 30 days of interest on your loan. This interest must be paid
at closing.
Hazard insurance impound
account
With an impound account, you put an additional 2
months' premiums on deposit. Addie Mae does not require
impound accounts on most loans.
Mortgage insurance impound
account
Mortgage insurance protects the lender should you
default on your loan. Addie Mae does not require PMI on many
loans.
Mortgage
insurance
You have to deposit between 2 and 12 months
worth of mortgage insurance into an impound account. This is usually
around $200, but can vary.
Property tax impound
account
If required, you'll need to put between 2 and 8
months' property taxes in an impound account. The property tax rate
varies, not only from city to city, but often from street
to
street. You can call your local tax assessor's office to
get an estimate, you can assume a 1% tax rate (the national
average).
Points and taxes
Unlike interest, points
are paid up-front. If you're purchasing a home, you can deduct the
points from your taxes in the year you buy the house. That means
money in your pocket
this year, rather than spread out over the
next 5 to 30 years. If you're refinancing, the tax deduction
from the points is spread over the term of the loan.
(consult your tax
professional for tax advice)
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