What fees can you expect to pay when submitting a mortgage application?
There are three (3) primary fees that are common throughout prospective lending institutions. The fees may be lumped together as one cost or detailed individually. They include the following:
The Mortgage Application Fee ― Varies between lending institution but can vary in price up to about $500. This fee is charged simply for doing business with a potential mortgagee. Know ahead of time if you will be approved as this is not refundable. If you are certain you will have no difficulty in obtaining a loan, shop for a lender who charges a nominal fee or no mortgage application fee at all.
The Property Appraisal Fee ― Varies between lending institution but vary in price up to $400
The Credit Report Fee ― The cost of obtaining a credit report on the borrower and any co-borrower(s). The price can range from $25-$100 per individual
Before discussing other fees that may or may not be assessed by your prospective lending institution, be aware that once you sign the mortgage application, you are responsible for paying the fees. Review the application carefully, ask for an explanation of questionable fees and negotiate waivers or reductions on any fees that are arbitrary.
With mortgage rates currently at an all time low, some lending institutions are choosing to tack on fees to offset their losses. Thoroughly review any fees associated with the mortgage application process.
Additionally, should your mortgage application be processed and accepted, there are a multitude of fees due at closing. Ask to see the Good Faith Estimate (GFE) or the HUD-1 Statement up-front, especially if you have no doubt that you will be approved for the loan. Negotiate or effect waivers on those mortgage application fees which are arbitrary. Note that some fees are not arbitrary ― including documentary stamps, credit reports, taxes, etc.
Other mortgage application fees that may be assessed include the following:
Origination Fee (or Service Fee) ― A fee charged by a prospective lender simply to get the mortgage application initiated. It can be a flat fee or equate to 1%-2% of the loan amount. Basically, this is the same thing as the mortgage application fee. ask for clarification and ask to have it waived or reduced. It can also be referred to as the Administration Fee.
Underwriting Fee ― The fee for the expert who reviews and assesses your mortgage application and recommends acceptance or rejection of your application. Not charged for FHA mortgage loans. This fee includes the following charges:
- Flood Certification Fee (about $10; determines if the property is in a flood zone)
- Commitment Fee
- Documentation Preparation Fee
- Wire Transfer Fee
- Processing Fee
- Tax Service Fee
Experts agree that you should submit your mortgage application with 3 or 4 lending institutions and ask for a Good Faith Estimate (GFE). Perhaps the mortgage application fees are reasonable and customary, but the closing costs are arbitrary. Review all charges, ask questions, and asks for waivers or reduced fees before you sign on the dotted line.
Good Faith Estimate (GFE)
Most lenders use the Good Faith Estimate (GFE), as required by the Real Estate Settlement Procedures Act (RESPA). The GFE is completed by the prospective lender and it details the loan costs for title search, title insurance, attorney fees, documentation filing, documentary stamps, pest inspection, flood inspection, local taxes, binder fees, notary fees, and other closing costs.