Lender Fees - These fees represent the lenders "overhead", junk fees, origination fees, and made-up discount points or they can be bona fide discount points. These fees are contained in the "800" grouping of numbers on the left hand side of the good faith estimate. Here is an explanation of the negotiable/ unnecessary fees.
- Origination Fee- this is purely profit. The lender will probably tell you this if you ask them. They will tell you something like " I have given you the best rate possible and we aren't making on the rate so I have to make a profit somewhere." For the most part they are right, if feel good about the interest rate this will give you a clear point to negotiate. Loan officers are extremely weak one day before closing. You can usually get a couple hundred shaved off here.
- Discount Point - A discount point can be profit or a bona fide fee from the lender. It can be used exactly like the origination fee only any costs that are added to this line is tax deductible. If you are "buying-down" your interest rate this is where the cost of that buy-down should be.
- Credit Report - This is a real fee, cheesy though in my opinion. Most lenders pay $10 - $12 bucks for a credit report but charge double for it. You can shave a few bucks here.
- Appraisal Fee - You probably paid this up front, make sure you are not double charged.
- Lenders Inspection - Absolutely a junk fee. If you see this on a good faith estimate have the lender throw this out immediately, and tell them not to insult your intelligence again.
- Mortgage Insurance Application Fee - Ditto with an exclamation point!
- Assumption Fee - Please, if you see this fee just laugh out loud until the lender removes it.
- Mortgage Broker Fee - This fee can go either way. Brokers are charged a fee to broker the loan, usually around $500 however, it is usually wrapped up in the loan amount. If the lender has low origination fees and a smoking rate it's probably legitimate.
- Tax Related Service Fee - If they have to request tax information their is postage and sometimes a small fee for the transcripts. Cheesy but it is usually real.
- Application Fee - I have never paid one and I suggest you don't either. These fees are usually sold to the lender by telling them that the "fee pays for the appraisal." The problem here is that if the deal blows up you're out the fee without an appraisal. If you pay for your appraisal yourself at least you have an appraisal for your trouble.
- Commitment Fee - Please see "Assumption Fee"
- Lender Lock in Fee - Ditto
- Processing Fee - This represents a real cost to the lender and is usually non-negotiable. FYI, their overhead aint that high, this usually represents a real cost and a little profit for the owner.
- Underwriting Fee - Same as above but most "lenders" don't employ underwriters which makes this a junk fee. This is usually non-negotiable too, but what the heck, give it a shot.
- Wire Transfer Fee - What money gets transferred by the lenders transfer? It's the closing company that does the transfers and will usually charge you for this. Make sure you are not double charged.
Third Party Fees - These are the 1100 and 1300 blocks of fees on your good faith estimate and most of these fees can be negotiated. First things first, if you are using the lenders title/closing company you are probably paying too much. These companies are spoon-fed by the lenders and have no incentive to be competitive. Get your phone book out and go to work. By law, the lender has to let you choose which third party companies you want to use.
- Closing or Escrow Fee - This fee is basically the same fee as fee #1107 the attorney fee. This is the actual fee the company that closes your loan is charging. You can shop this around and find cheaper closing/attorney fees and ask the lender to use your company. You can usually save a few hundred bucks here. Most lenders will estimate this cost at first and at closing time it almost always is higher. If you use the mortgage companies title company ask them for a closing fee sheet, then shop it.
- Abstract title search, Title Examination fee, Doc Prep fee, Notary fee - These are junk fees, bar the title search. Just include these fees in your total comparison of title companies and you will be fine.
- Title Insurance - This is where the title company makes most of their money. Most states have caps that they can charge but you can usually get the title insurance for less. Make sure you ask the title company how much they charge, $2.50 per thousand is a fair amount for them to charge.
- 1300 Block Additional Charges - These usually only apply to purchases. You should probably hire your own pest control inspector, home inspectors in these situations. Realtors and loan officers aren't very thrifty when they spend your money.
Escrow and Taxes - These are non-negotiable charges. All the escrows are for is to stash money in an account that pays your taxes and insurance when they come due. These fees will be the same for all lenders and they are what what they are. As far as the State and local taxes, if you can talk the government into taking less money please call me and let me know how you did it!
