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Understanding Typical Fees and Charges

Good Faith Estimate

A good faith estimate is an estimate prepared by a lender for the costs associated with a particular loan package. It includes a loan type, loan amount, down payment amount, an interest rate, information about projected monthly payments, and a detailed list of all the expenses you will be charged at closing. A Good Faith Estimate is just an estimate and does not commit either the lender or the homebuyer to the terms, but it is a helpful tool in comparing loan possibilities and projecting expenses. The expenses commonly listed on a Good Faith Estimate are described below.

Origination Fees

Origination fees are fees charged by the mortgage company for handling the loan. Typical origination fees range from zero to one percent of the amount of money you borrow. For example, if you borrow $100,000, you may expect to pay up to $1,000 at closing for the origination fee.

Discount Points

Discount points are sometimes paid by the homebuyer to obtain an interest rate lower than the typical rate that is being offered at that time. Each discount point purchased costs the homebuyer one percent of the amount of money borrowed, and usually reduces the interest rate by ¼ of one percent, although that can vary due to market conditions. For example, on a $100,000 loan, paying one discount point would cost $1,000, and might reduce an interest rate of 6.5 percent to 6.25 percent. The longer you own the home and make payments, the more this lower rate will benefit you. It typically takes from three to six years for each point purchased to pay for itself in interest savings. Some loan packages do not include discount points, and very few include more than one discount point. When comparing interest rates, check to see if you are being asked to pay any discounts points to get the quoted rate.

Appraisal Fee

In order to establish the value of the property, the lender will have a professional appraisal done, and the fee will be charged to the homebuyer at closing. Typical appraisal fees can cost up to $300, and sometimes these fees are requested in advance as part of an application fee.

Credit Reporting Fee

Before approving your loan application, the lender will check your credit through professional agencies. The costs for these services are charged to the homebuyer at closing, and usually cost up to $50 per applicant.

Recording Fees

Recording fees are charged by the lender at closing to cover the costs of having your mortgage and property deed accepted, or recorded, by the appropriate local government office. These fees usually cost up to $45.

Settlement Fees or Attorney Fees

Settlement fees or attorney fees are charged to the homebuyer at closing for the services of the attorney who prepares the legal documents for the property transfer and performs the closing. Typical fees charged to the homebuyer range up to $400.

Title Insurance

Title insurance is usually required by the lender as protection against any future legal issues about the seller's right to sell the property to you without any debts or obligations attached to the property. Typical charges are $3 for every $1,000 borrowed, so on a $100,000 loan a charge of $300 would be typical. Make sure and ask us about Owner's Title Insurance.

Flood Certification

Flood certification is required by the lender to pay a professional agency to examine federal floodplain maps and compare them to the location of the property. They will then decide if flood insurance should be required. The charges to the borrower at closing for this service range up to $20, and do not include the cost of any flood insurance that may be required by the lender.

Tax Service Fees

Tax service fees may cost the homebuyer up to $75 at closing to cover costs associated with updating property tax records.

Survey

The lender will pay a professional surveyor to visit the property and confirm that the house is located entirely on the land being sold, and that no structures like fences or outbuildings that belong to a neighbor are positioned on the property. This usually costs the borrower up to $150, and will cost more money if the homebuyer has requested that the property boundaries be marked with stakes.

Commitment Fee

On an FHA loan, the lender will require that the homebuyer pay a commitment fee at closing. This usually costs up to $300. This fee is not charged on a VA loan or a conventional loan.

Underwriting Fee

The lender will probably charge a service fee of up to $200 for services involved in the process of determining how much money you are eligible to borrow.

Courier Fees

Courier fees of up to $30 may be charged to the homebuyer at closing for the delivery of documents or checks.

Final Inspection Fees

Final inspection fees of up to $75 may be charged to the homebuyer at closing to pay for having a professional visit the property on behalf of the mortgage company to assure that construction has been completed in a manner that makes the property sufficient collateral for the loan. This should not be confused with a home inspection, which homebuyers sometimes arrange to get the opinion of a professional on the condition of the property.

Automated Underwriting Fees

Automated underwriting fees of up to $35 may be charged to the homebuyer at closing to cover processing costs if the lender uses a computer program or service to help in determining how much money you may be eligible to borrow.

Escrow Fees

You may also be required to pay a certain amount of property taxes and homeowners' insurance premiums in advance on the day of your closing. These costs vary according to property tax rates, the date when taxes will be due, and on the cost of a typical homeowners' insurance policy.



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