What mortgage application fees should you expect to pay when submitting an application? This can depend on your mortgage lender and the type of home loan you get. Buying a home isn’t just about the asking price. The list of mortgage application fees associated with purchasing a home are extensive and can vary depending on your mortgage lender and the type of home loan you get. Mortgage application fees are required to cover the costs of the loan approval process. These fees may be lumped together as one cost or detailed individually, and some are required up front, so it’s important to evaluate how and when you will be charged as you compare mortgage lenders.
Most Common Mortgage Application Fees
While mortgage rates are historically low right now. Because of this, some lending institutions have chosen to tack on fees to offset their losses, so you must thoroughly review any fees associated with the mortgage application process. Be aware that once you sign the mortgage application, you are responsible for paying the fees. Make sure you carefully review the loan application, ask for an explanation of questionable charges, and negotiate waivers or reductions on any fees that are arbitrary or redundant. You are entitled to this information so don’t be afraid to ask questions. Lenders are required to provide a Loan Estimate no later than 3 business days after borrowers submit a loan application.
It requires a lot of due diligence but it will save you money and aggravation in the long run if you ask your lender to explain and justify them. Some fees will be nonnegotiable because they are imposed by a government entity or paid to a third party. However, these mortgage application fees are the most common throughout prospective lending institutions.
The Mortgage Application Fee
This fee is charged simply for doing business with a potential mortgagee and varies among lending institutions, but can range in price, up to $500. This fee is not refundable and required up front so make sure your credit is good before you apply and pay or else you’ll lose that money. If you are certain you will have no difficulty in obtaining a mortgage loan, shop for a lender who charges a nominal fee or no mortgage application fee at all.
The Property Appraisal Fee
Varies among lending institutions, but can range in price from $300 to $500. This fee is probably the most common upfront cost across the board, whether you’re working with a mortgage lender, broker, bank, or credit union. Lenders require a property appraisal before approving a home loan to determine the value of the property, and more importantly, the loan-to-value ratio, which is a critical factor in determining costs that can’t be known without a valuation. Additionally, the lender requires the appraisal to be paid upfront because the appraiser still needs to be compensated whether the loan moves forward or not.
The Credit Report Fee
This is the cost of obtaining a credit report on the borrower and any co-borrower(s). The price can range from $25-$100 per individual. Lenders want to know your credit history. If you already run your own credit check, you may balk at having to pay for an additional one run by the lender but it’s unlikely you can avoid this fee. Plus, it’s a small price to pay to ensure you’ll be approved and it’s always good to know your credit history so there are no surprises.
Origination Fee (or Service Fee)
A fee charged by a prospective lender simply to get the mortgage application initiated. It may be a flat fee, or it may be equal to 1%-2% of the loan amount. This can cover services such as document preparation, notary fees, and the lender’s attorney fees to name a few. Basically, this is the same thing as the mortgage application fee and may also be referred to as an administrative fee so it’s important to ask for clarification of what is covered, if you’re unsure. Consider asking to have it waived or reduced.
The fee for the expert who reviews and assesses your mortgage application and recommends acceptance or rejection of your application. Not charged for government-backed FHA mortgage loans. This fee usually includes the following charges:
- Flood Certification Fee (determines if the property is in a flood zone)
- Commitment Fee: (a fee to keep a line of credit open, or to guarantee a loan for a future date)
- Documentation Preparation Fee
- Wire Transfer Fee
- Processing Fee
- Tax Service Fee
Negotiating Mortgage Application Fees
As previously mentioned, there are many mortgage application fees that you might not think of, especially if you’re a first-time home buyer: title fees, inspection fees, attorney fees, there’s even a fee to extend your rate lock against potential percentage rate increases that are out of your control. While most mortgage fees are standard, some lenders may throw in extra “junk” fees that you should watch out for. These include unnecessary fees or charges for services covered by other fees you’re already paying. Read all documents associated with your mortgage carefully, and ask your real estate agent, mortgage broker, or lender detailed questions about the fees they ask you to pay. Most mortgage application fees are unavoidable, but some have room for negotiation. While the following list is not conclusive, it’s a good starting point to help you in the process:
Fees you Can Negotiate
- Origination, underwriting or processing fee
- Discount points/credits
- Commitment fee
- Rate lock fee
- Pest inspection
- Survey fee
- Title-Insurance binder
- Title-Lender’s title policy
- Title-Settlement agent fee
Fees you Can’t Negotiate
- Credit report
- Flood certification
- City and county stamps
- Recording fees
What is a Loan Estimate Form?
As mentioned earlier, lenders are required to give you a form called a Loan Estimate (Before October 2015 this was called a “Good Faith Estimate”) within three business days of receiving a loan application. If they don’t, they are in violation of the Truth in Lending Act. This estimate provides overall details about the loan and are actually fairly straightforward so reviewing multiple estimates can help you narrow down your options. A loan estimate will not affect your credit score as this is done before the lender approves your application. The loan estimate details include the mortgage application fees and may also include: the loan amount, term length, estimate closing costs, interest rate, tax and insurance costs, inspection fees, document fees, any repayment penalties, and escrow account expenses.
Mortgage Application Fees When Refinancing
If you are looking into refinancing your home instead, you may consider first the savings you can make to determine if the costs are worth it. To avoid confusion, know that borrowers applying for a home equity line of credit (HELOC), a manufactured housing loan that is not secured, or a home-buyer assistance program loan will receive a truth-in-lending disclosure instead of a loan estimate form. Those applying for a reverse mortgage will receive a HUD-1 settlement statement
Mortgage Application Fees: Conclusion
Additionally, should your mortgage application be processed and accepted, there are a multitude of fees due at closing. Most experts agree that you should submit a mortgage application to 3 or 4 different lending institutions and compare their loan estimates. Keep in mind, while the mortgage application fees are reasonable and customary, the mortgage closing costs are often arbitrary. It’s in your best interest to review all the charges, ask plenty of questions, and request waivers or reduced fees before you sign on the dotted line. Finding the right mortgage lender can be time-consuming but in the long run, your diligence and attention to details of your closing costs may save you money in the long run.