Understanding Loan Costs And Fees

If you’ve looked around for a mortgage before than you know there can be some companies out there that will give you a smoke screen as to what the fees, if any are on your loan.  I’ve heard competing companies quote clients zero point loans, zero cost loans, zero charge loans and when they go to sign loan documents they’re being charged much higher fees than anticipated.  In fact it’s not uncommon for even the most savvy real estate investor to get caught up in these lies.

In the mortgage industry (refinance or purchase) there can be three types of points:  loan origination, mortgage broker and lender discount points.  One common practice for loan officers is to claim zero points and yet what they’re referring to is not charging loan origination but there still maybe broker or discount points however they fail to disclose that.  One national direct lender quoted a potential client of mine a loan with “zero points” and a really low interest rate.  When the borrower received the Good Faith Estimate (after doing the appraisal which he paid for) there were nearly $17,000.00 in total fees.  How is that possible?  Well for one there were points just not loan origination points, second there was a rush fee, a marketing fee, a this fee and a that fee…line after line on the Good Faith Estimate  One mistake that is common for borrowers is to think mortgage impounds are a fee charged by the lender or broker and this is not the case.

So how do you avoid this trap?  First work with 3-5 mortgage companies to ensure you receive the best possible loan.  One thing borrowers need to know if everyone is quoting a 6.00%-6.5% interest rate and 1 of the 5 loan officers is a at a 5.50% with the lowest overall fees that loan probably does not exist.  In the industry we call that “not a close-able loan” and you’re more often than not being scammed.  Next find out if the person is licensed (not all loan officers are) and if there are any complaints against him/her.

When working with someone ask a ton of questions and keep asking the same ones even if you know the answer.  The reason is that if you find the loan officer changing his story over and over again you might not want to work with that individual.  Lastly the most important question to ask is what are the total fees and cost to do the loan?  Let them know that you want to hear about every single possible charge.  Second; loan origination, broker and discount points are there any?  Third what are the charges for appraisal, title, escrow, processing and underwriting the file?  And never pay a fee to see a Good Faith Estimate or pay a deposit to go towards your closing costs, even if they promise they’ll refund you.  Good luck trying to get it back.

If you are doing a true no point loan on a refinance, than your fees for a 300k-500k loan amount should run between 2.5k-3.5k for processing, underwriting, appraisal, title, recording with the county and escrow.  If you elect to pay points to bring down the interest rate of your loan, than your fees will be higher.