Definitions of common fees
Most lenders roll administrative fees into the Lender's processing fee, but some charge for it separately for internal accounting reasons. It is not directly tied to any service that they provide or cost that they incur. It is a flat fee that typically costs $50 to $100.
Lenders and Brokers may charge an application fee, it covers the costs associated with the initial processing of your loan package. application costs are sometimes included into the processing fee, but some charge for it separately for internal accounting reasons.
To ensure that the house is worth at least as much as you are paying for it, lenders hire a third-party to objectively appraise the property. The fee for this service is usually between $300 and $1000. The lender will sometimes physically pay the appraiser at the time of the service, and then bill you for it at closing.
This is the primary way that a broker charges for their service. Traditional brokers charge between one and three percent of the loan amount. If a broker says that they don't charge a fee, they are probably increasing either the interest rate and/or the Broker processing fee to compensate.
Broker processing fee
Brokers charge a processing fee to cover the cost to package the file, submit it to the lender, and help coordinate the closing of your loan. This cost covers the expense of processing the file internally or the cost of outsourced processing. This is a flat fee between $400 and $500.
Lenders may use couriers to deliver documents to the escrow/settlement firm, appraisal company, title company, or broker. This fee may already be included in the Lender
administration fee or Processing fee.
Credit report fee
Lenders require credit reports to determine how well you have been able to handle financial obligations in the past. Lenders often get credit reports from more than one bureau, or get a report from a company that combines credit bureau reports. The lender will usually bill you $50 to $75 to look into your credit history.
Flood check/Flood Certification fee
The lender requires an investigation to determine if the house is on a flood plain. This will cost you about $15 to $25. If your property is in a flood zone, you will be required to buy flood insurance. The average annual premium is $300, but yours will depend on the value of the home.
Lender documentation preparation fee
Once a mortgage is approved by the underwriter, a mortgage agreement and other documents must be drafted for closing. Lenders often have these prepared by an outside firm. The $50 to $250 fee covers this expense, or the cost to do it in-house.
Lender origination fee
The lender may charge an origination fee. Origination fee vs. discount points Origination fees are sometimes rolled into the discount points. The typical origination fee is one point, or one percent of the loan amount.
Lender processing fee
When you send your application to the lender, they review and process it. This costs them money, and therefore costs you money, usually between $100 and $300.
Lender underwriting fee
Underwriting is the process of evaluating your application to determine your ability to pay your loan back. Lenders have underwriting departments filled with people who examine mortgage files all day ( you thought your job was dull).
The lender charges you a fee between $150 and $675 for this process.
Tax service fee
To make sure your property taxes are paid on time, the lender hires a tax service company to monitor your tax payments. This is how your lender makes sure the government doesn't sell your home to pay back taxes. The cost is $20 to $150.
Wire transfer fee
If the lender has to wire funds to process your mortgage, they'll charge you $10 to $50.
Depending on what state, and even what county you are buying in, there are different services that help manage the process. You'll be charged a fee for these services, it may be called an escrow fee, a settlement fee or a closing fee it is basically the same thing.
An escrow officer acts as an objective third-party to coordinate exchanges between the parties. The fee for their services is between $200 and $500, depending on the sales price of the home.
In areas without standard escrow instructions or sales contracts that include instructions, a lawyer does it. The lawyer's fee is similar to the escrow fee. The lawyer or escrow officer details who receives what, when, and in what sequence. These instructions must be signed by both the buyer and the seller.
Lender's title insurance
To insure that the seller has a clear title, a search is done of the offices of the recorder of deeds, county clerk, tax assessor and surveyor. There is also a search of legal rulings
concerning the property and prior owners. Lenders require that you insure the results by purchasing title insurance to protect both you and the lender in case the search was wrong and the seller does not in fact own the house.
Title insurance is also required for refinances (usually at a reduced rate), since the new lender will want the same protection from any undiscovered problem with the title.
Many counties have computerized this process, in some areas it is still done by hand. As a result, costs can vary depending on a property's location.
Owner's title insurance
In addition to the lender's title insurance policy, you are also required to get your own insurance policy.
This policy is more expensive than the lender's policy since it's based on the purchase price (unlike the lender's policy is based on the loan amount). This is a one-time fee that is between 0.3% and 0.6% of the purchase price. So for a $110,000 house, you would pay between $330 and $660.
This pays for recording documents at the county clerk's office.
Title company document preparation fee
The title company that does the title search and holds your policy may charge a $50 to $200 fee to process and prepare your paperwork.
Prepaid hazard insurance
The good news is that you won't have any hazard insurance bills for a while. The bad news is that this is because lenders usually requires you to pay your hazard insurance at closing. A year of hazard insurance will cost you between 0.35% and 1% of the loan amount. On a $100,000 house, this is $350 to $1,000.
In the time between the closing date and your first mortgage payment, you will accrue as much as 30 days of interest on your loan. This interest must be paid at closing.
Hazard insurance impound account
With an impound account, you put an additional 2 months' premiums on deposit. Addie Mae does not require impound accounts on most loans.
Mortgage insurance impound account
Mortgage insurance protects the lender should you default on your loan. Addie Mae does not require PMI on many loans.
You have to deposit between 2 and 12 months worth of mortgage insurance into an impound account. This is usually around $200, but can vary.
Property tax impound account
If required, you'll need to put between 2 and 8 months' property taxes in an impound account. The property tax rate varies, not only from city to city, but often from street to
street. You can call your local tax assessor's office to get an estimate, you can assume a 1% tax rate (the national average).
Points and taxes
Unlike interest, points are paid up-front. If you're purchasing a home, you can deduct the points from your taxes in the year you buy the house. That means money in your pocket
this year, rather than spread out over the next 5 to 30 years. If you're refinancing, the tax deduction from the points is spread over the term of the loan.
(consult your tax professional for tax advice)