7/22/2011 4:50 PM ET|
Annoying homebuying fees to avoid
Your mortgage lender can hit you with a wide range of charges, some legitimate but some excessive. By shopping around and negotiating, you can reduce your loan's costs.
You know you're supposed to avoid "junk" fees when you get a mortgage. But here's the problem: Junk fees can be harder to spot than you might think.
Plenty of fees charged by the travel and banking industries are junk. Those fees are almost pure profit and barely related to the cost of providing the underlying service.
When you're getting a mortgage, though, many of the fees are associated with legitimate costs. Also, state laws and lender practices can vary a lot, resulting in different types of charges, plus a range of fees.
Lenders also 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 the fees folded into a higher rate.
The good news is that you have more leverage these days to negotiate away excessive charges. The feds have put some teeth into rules that require lenders to stick to the good-faith estimates they give you at the start of the lending process. That's led to fewer surprise fees stuck in at the last minute.
But you still have to put some effort into the process if you want a good deal.
"Most consumers don't shop, and that's really bad," said Andrew Pizor, a staff attorney of the National Consumer Law Center. "You're allowed to negotiate. You're allowed to haggle, and you should."
The best way to shop for a mortgage is to apply with at least three lenders and compare their good-faith estimates on similar loans, said Holden Lewis, an assistant managing editor for Bankrate.com, which surveyed closing costs in each state last year.
Shopping around can be expensive if the lenders charge application fees (not all do, but some charge up to $500). The potential savings, though, may make paying the charges worthwhile.
Here are some key fees to compare:
Lenders may chop these up into different categories and call them by various names: commitment fees, application fees, processing fees, underwriting fees. The handles don't matter as much as the total, which is what will be shown in the "A" box on Page 2 of the three-page good-faith estimate.
You're likely to pay more in some states than others, the Bankrate survey found. Origination fees for a $200,000 home loan averaged $2,210 in New York state but $1,406 in neighboring New Jersey.
Even within a state, origination fees can run the gamut. In New York state, the fees ranged from the low $700s to more than $4,000.
These costs are supposed to reflect the work that goes into creating your loan -- and there's certainly more work involved these days, as underwriting standards and licensing requirements have gotten tighter, Lewis said.
Still, there's clearly plenty of room for padding here, which is why you want to compare at least three lenders' bids for your business and check the averages for your state.
Note that origination fees can also include "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 if you're comparing the origination costs of one loan that includes points to another with a higher rate that doesn't include points, you're not really comparing apples to apples. It would be better to compare two deals that include points, or to subtract the cost of the points from one deal to better compare the remaining costs.
And remember: These costs are negotiable. A lender who tells you otherwise is probably hoping to take advantage of ignorant borrowers.
Lenders hire appraisers to evaluate your property's value -- and high-end properties may require two independent appraisals, said Ilyce Glink, the author of "Buy, Close, Move In" and "100 Questions Every First-Time Buyer Should Ask." Appraisal fees typically range from $225 to $750, depending on the value of the property. In the Bankrate survey, appraisal fees were generally under $400.
Again, if the lender is proposing to charge more, you should find out why.
Lenders aren't supposed to mark up third-party services, which include appraisals, credit reports, settlement fees, flood certifications, pest inspections, surveys and title work. But lenders also don't have to choose the most economical providers. Cozy business relationships may make lenders more interested in keeping a treasured partner happy than in giving a good deal to their borrowers.
Kathy Kristof's lender wanted to charge her $700 for an appraisal two years ago, when she was refinancing her home. Kristof, a Los Angeles personal-finance columnist and the author of "Investing 101," asked why the charge was so high and was told the bank was paying "for an exceptionally thorough job," since the market in her area was declining.
Because she had a lot of equity, Kristof knew she could argue the point. She pointed out that her loan represented only a small fraction of the home's value, so the risk to the lender was minimal. The lender then used an electronic appraisal that cost her just $75.
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"Courier, postage and wire-transfer fees
That these fees even exist in an era of scanners, email and electronic funds transfers is kind of amazing, yet many lenders persist in charging them"
Final mortgage documents are certified, notorized and recorded documents, so no Liz they CANNOT be scanned or
emailed! This is why there are small courier and postage fee's!
Well on the appraisal end the Government Blamed tthe appraisers for the crash since they could not find anyone else that had no voice. They made a law so the lender could not even talk to the appraiser there must be a middle man. NOW Wells Fargo owns RELS which with the new federal law, a lender can not call the appraiser he has to call a third part, SO boom RELs charges people 750 for the appraisal they offer the appraiser 225. SO Bank Of America Formed Landsafe and do the same thing. The appraiser who most of which are honest hard working honorable people are starving. The ones with any diginity are saying no to the 225, so you wind up getting the worst appraisers who are just there to do a quick and often poor report. But that is what the bank wants, they make 500 . We are in such a mess. WE protect the bank, people steal money we let them walk, Tell me this who is the lead investigatior in the case of the 90 million bonus for the Fannie Mae and Freddi Mac boys.
America is the Greatest Country the World has ever seen, BUT if you think it is an auto renewable thing you are part of hte problem. We can Blame the Mexican or Mel Gibson but until we look at the Mirror we are headed to Hell in hand basket...Joshua Funrunnerstravel.com Single people who care
You missed the mark on this one. The mortgage industry has a new GFE which clearly points out the various costs of doing a mortgage. The originator/lender is now held accountable for many of the costs quoted even though they may not have any responsibility for setting those costs. That is why I only quote title/escrow companies that will guarantee their rates. What you need to know is that if I quote a company and the borrower shops and chooses someone else based upon what they may quote at the start and it ends up being more due to those same additional fees, waivers, endorsements, etc., I will not be held responsible for the difference. There really are a lot of errors in this article. By the way, my compensation in no longer tied in any way to the type of loan or the costs. It is based solely upon the loan amount so volume is now the key to success. If I want more loans, it is now ideal for me to make sure that the costs of getting a loan remains low so more people will choose to use me. In regards to your comments on appraisals, lenders can no longer choose to work with a particular appraiser. Appraisers are chosen by Appraisal Management Companies (AMC) and we do not get to even chat with them. Good luck on shopping around on that. It won't work. Gouging is really a thing of the past. Old information.
"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."
I guess you missed the government regulation that says if the HUD-1 is off by more than 10% from what the good faith estimate says, the lender has to pick up the difference and is not allowed to charge it to the buyer.
This is not the only mis-information you have happily provided to all your readers, and this is not the first time I have suggested you learn your subject BEFORE pretending that you're an expert.
Ask for a "good faith estimate" from the lender before signing on a mortgage loan. This should provide a list of all the loan fees.
FYI lenders can't pick the appraisers on conventional 1st mortgage anymore. And the only time I see credit reports cost more than $20 is when we have to go do updates because there are balances that don't seem legit we have to clear so the borrower doesn't have to pay them off or if something delays the closing to the point the credit report expires. Checking your credit regularly and correcting issues yourself before you try to get a loan will save you both time and money. Also, sometimes the lender has to pay for items you could easily provide yourself at no cost but rather than just provide the requested documentation peole like to argue and complain, so to avoid causing an "inconvienience" we just take care of it ourselves.
Always question fees you don't understand, but also understand business have to pay thier employees, their phone bills, their mortgage . . .
The fourth column in the chart below is closing costs. Notice how this financial institution uses higher closing costs instead of points in order to lower the interest rate. This is one of the "best finance rates in your area" that I get when clicking on the link in the article. The lender is not in my area (online bank I think) as a matter of fact none of the institutions listed were local.
I am refinancing my mortgage and got the 3.625% rate from my local bank for about $1300 in fees. Had to get an appraisal - tomorrow - cost is $350. Had to redo the title insurance too for about $500. I would be careful going with the lowest cost title insurance because title insurance is only as good as the company behind it.
This is my 7th mortgage or refi in about 22 years and I can't say I see a big difference in fees or paperwork that I did in the last week vs. 20 years ago. This includes my first house which we did with no money down and our second house for which we had to find financing the week of the first gulf war when many banks wouldn't even quote a rate much less give out a loan. Finally got one at 10.75%
I am not in real estate as a business; I am your average consumer and is from personal experience. The one major thing that folks need to steer clear of is the pre payment penalties. This can come into play on a home loan or commercial loan; from anywhere in my experience from two years minimum to the life of the loan. With an interest penalty of what ever is placed in the loan at the time of signing. I have seen 9%. This also can be the same in a commercial loan but the may also, last the life of the loan as well.
This fee is applied to the loan when you ether sell the property or Refinance the loan before the loan is payed off.
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