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Expenses During The Mortgage Loan Process Explained Part 1
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One factor that limits some folks when it comes to buying a home is money in the savings account for down payment and/or closing costs. It is common to think that you need to have money to purchase a home. What is not common knowledge is how much will you need and what you need it for. Let us look at what you will probably have to pay for during the loan process before you loan is approved.
Review part 2: Expenses During The Mortgage Loan Process Explained Part 2
Review part 3: Expenses During The Mortgage Loan Process Explained Part 3
First, it will cost you some money on your way to purchase a home. There are two expenses that you will typically see that you will probably have to pay for up front. However, you will probably only have to pay one or the other. The first is a non refundable application fee to a mortgage lender or bank. While the lender does not always break down what gets paid for when you pay this fee, often it is used to pay for the appraisal and your credit report. To their credit, most lenders who charge this fee will give you a credit on your closing costs for the application fee when your loan settles. In my opinion, if you have to pay an application fee up front, you should look for a new lender to work with. There are plenty of mortgage brokers and lenders who do not charge these fees.
The problem with this fee is that it is non refundable and what happens to your money if for some reason you do not go through with the loan? You do you get your money back. I find this particularly frustrating for folks who have called me after the fact where there were turned down after they paid their application fee and cannot get their money back. It’s even more frustrating for me knowing that the original mortgage company did not have the appraisal done and kept the fee anyway. In this case, if you came to me in this situation, I would have you cover the cost of the appraisal and at settlement I would refund your original application fee out my fees so that you are not over charged for your loan.
Along with the appraisal, when you pay the lender an application fee, the lender is going to get your credit report. If this is the case, you should ask your loan officer for the “consumer version” of your credit report. Every credit agency produces a consumer ready credit report. This type of credit report has less information on it, but it is still useful for your purposes to see what you credit looks like. If they will not give it to you then you might look for another lender who will give you a copy.
In the case where you do not have to pay an application fee to get your loan started, the second expense that you will probably have to pay is the fee for the appraisal. In the case of you being asked to pay for the appraisal up front, my thoughts are that it is okay and that you should be expecting to pay for this before your loan closes. As pointed out earlier, you will not typically have to pay this when you pay an application fee to your lender. In the case where you do not pay this fee and you get an appraisal done your lender will probably ask you to pay the appraiser direct at the time when they do your appraisal.
Why you pay for this up front is just in case you do not get the mortgage you were looking for, the appraisal still needs to be paid for. Lenders do not make it a habit of paying for appraisals up front because of the possibility of loan not going through and the lender does not want to get stuck with the bill for the appraisal. Appraisers are third party services so they do not work for the mortgage company, and they only get paid when they do an appraisal.
One other fee that might have to be covered if you do not pay an application fee will be the cost of your credit report. Your mortgage company is typically charged somewhere between $10 - $20. If you are asked to pay for this fee, the mortgage company can only charge you what they are charged as they are not allowed to markup this fee to resell it to you. As I mentioned earlier, if you have to pay for your credit report, make sure you get a copy of the consumer version. You want to be able to refer to your report during the loan process. This is especially true if you have things on your credit report that you need to work on.
These are the basic fees that you might be asked to pay before you get your mortgage. If you have to pay a non refundable mortgage application fee, I would either find a new mortgage company or I would for sure make them give you a credit for paying this fee at the closing table. Stay tuned for another article on the things you have to pay for at closing.
Review part 2: Expenses During The Mortgage Loan Process Explained Part 2
Review part 3: Expenses During The Mortgage Loan Process Explained Part 3
Written by Dale Stouffer, Mortgage Broker
This Article is designed to be of general interest and should not be considered professional advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal insurance and or legal adviser.
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