This article is part 2 of a 3 part series on the expenses or costs of getting a mortgage for either buying a home or refinancing your current home mortgage.
Review part 1: Expenses During The Mortgage Loan Process Explained Part 1
Review Part 3: Expenses During The Mortgage Loan Process Explalined Part 3
Within 3 days of giving an application for a mortgage to buy a home or to refinance your home loan you should receive from your mortgage broker or lender a copy of their Good Faith Estimate (GFE). Make sure when you make an application that you ask for your GFE. If the loan officer will not give you one when you ask, go looking for another loan officer. The fees and numbers found on the GFE should closely match what you will see when you get your mortgage. Once you get your GFE, use this guide to determine what it is saying to you.
I will start from the top of the GFE and work to the bottom. If you look closely you will see line numbers on the left hand margin going down the page. I will refer to these numbers as much as possible so you can easily follow along.
At the top of the GFE you should see your name and the property address that will be listed on your loan documents. If you are just shopping for a mortgage program or interest rates to buy a home, you might not have a property picked out. In this case, you might have to ask for the GFE to be based on a specified loan amount that you qualify for. You also might see in the address line “TBD” which stands for “To Be Determined”.
Lines 801, 802, and 808 – Loan Origination, Loan Discount, Mortgage Broker Fee. These are the fees that are associated with what is commonly called “points”. A “point” is 1% of your loan amount. For example, 1 point of $200,000 (loan amount) is $2,000. Typically your loan officer uses these fees to get you a lower interest rate and to make their money; they are completely negotiable. If you see these fees on your GFE, ask your loan officer about it. Ask them what your interest rate and payment would be without it being charged. Usually there should be about a .25% decrease in your interest rate if you are charged 1 point. List of Mortgage Terms
Line 803 – Appraisal Fee - You have to pay for an appraisal of the property you are looking to purchase or refinance. This fee ranges between $300-$500, depending where you are in the country. Be ready to pay this fee up front when the appraisal is done depending on what your mortgage company’s policy. If you pay the appraiser at the time of the appraisal, this number might be shown in parentheses.
Line 804 – Credit Report Fee - You may or may not be charged this fee. Again, it depends on your mortgage company’s policies. Some mortgage lenders charge an application fee which pays for the appraisal and the credit report (See Part 1). Ask your loan officer about this fee if you see it. Line 805 – Lenders Inspection Fee – This is charged if the lender has to send an inspector out to your property to see if work was completed. Generally this fee is for construction and FHA rehab loans. For most all other loans you should not see a charge for this.
Line 809 – Tax Related Service Fee - Lenders charge a fee to have your real estate taxes tracked. The last thing they want is your real estate taxes going delinquent.
Line 810 – Processing Fee – Your loan officer or Mortgage Company will charge this fee to pay their processor to process your loan. It can be negotiated with your loan officer if you push it. The amount of this fee is a wide range from $0 to $800. To waive this fee however, you might see a bump in your interest rate to pay for it, so make sure you ask your loan officer about what happens if they waive this fee. Remember, no surprises at closing.
Line 811 – Underwriting Fee – This fee is charged by the mortgage lender who is underwriting your loan. Again, if you really push your loan officer to waive this fee, they might, but expect to see your interest rate go up some.
Review Part 1: Expenses During The Mortgage Loan Process Explained Part 1
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.
