| Excessive Mortgage Fees exist in most of the | | | | closing cost appear cheaper during the initial |
| loans originated in America. I would like to begin | | | | review. When closing time comes around they |
| by debunking the number one myth out there | | | | use the excuse "those aren't my fees" to explain |
| concerning closing cost. "No Closing Cost Loans" | | | | the excessive mortgage fees. So when |
| do not exist. This is a marketing gimmick designed | | | | comparing lenders ignore the third party cost. |
| to make mortgage holders pick up the phone. | | | | Lets talk about the 800 block of lender fees. All |
| Ask yourself these questions: | | | | lenders will have "junk fees". These are fees that |
| - Do I know an attorney who works for free? | | | | represent the overhead and profit of the lender. |
| - Do I know an appraiser who works for free? | | | | In fairness, they do have to employ closer's, |
| - Can I get the State and County to waive their | | | | funders, processors and if they are a lender |
| fees? | | | | underwriters. The junk fees range from $500 to |
| - Will my lender work for free.... you get my point. | | | | $1500 and are usually put under the headings: |
| It has been said, that in business, if we were able | | | | - 805 - Lender's Inspection Fee |
| to extract all of the wisdom from all of the | | | | - 808 - Mortgage Broker Fee |
| world's top business minds and put it into one | | | | - 810 - Processing Fee |
| sentence that sums up the entirety of their | | | | - 811 - Underwriting Fee |
| knowledge it would read "there aint no free lunch"! | | | | If you ask the loan officer about these fees they |
| This holds true in the mortgage business as well. | | | | will explain that they represent the companies |
| If the closing cost are not paid by you they are | | | | overhead and do not represent a profit. If you |
| paid by the lender, period. All lenders sell their | | | | believe that I have a bridge I would like to sell |
| loans (Yes even if you make payments to them) | | | | you! The truth is they do represent overhead for |
| s | | | | the company and a profit for the owners, not the |
| In order to compare closing cost from lender to | | | | LO. The loan officers are not commissioned on |
| lender we must make sure all lenders are on the | | | | the junk fees. However as a savvy shopper you |
| same playing field. Excessive mortgage fees are | | | | should consider them in your final decision making |
| easily explained if not seen in blackand white. The | | | | process. |
| document that spells out the closing cost on a | | | | The part of the 800 block of fees that represent |
| loan is called the "Good Faith Estimate" (GFE) you | | | | the profit for the LO is the origination fee and the |
| can see an example below this article. This is a | | | | discount fee. Discount was originally designed to |
| standard RESPA document and should not vary | | | | offer a buy down for the borrower. However |
| among lenders. Never accept what a lender tells | | | | most lender will sneak some excessive mortgage |
| you concerning closing cost unless it is on a GFE | | | | fees into "Discount" and tell you you are buying |
| and in your hand. | | | | down the rate. This is why it is so important to |
| Please open the link below labeled "Good Faith | | | | find the par rate before negotiating. On our mock |
| Estimate". | | | | rate sheet (below) all of the rates that the pricing |
| I would like you to notice in the main body of the | | | | falls below 100.00 represent a cost. So if the price |
| document that each section of fees is broken | | | | on the rate sheet shows 99.55 llike it does for the |
| down into categories. Each of the categories are | | | | rate 5.875% you should expect to pay 0.45% of |
| given a numerical value to the left of them. These | | | | the loan amount in discount. Ask your lenders |
| categories are labeled from 800 - 1300 in blocks. I | | | | what their "par rate" is. The worst you will get is |
| have included a provided a quick breakdown of | | | | alie, the best is the truth. Ask a few lenders and |
| each of the fees and sections (below). The thing | | | | compare their answers with what is online. At the |
| to know when comparing closing cost is that 5 | | | | end of the day you should be pretty close. |
| out of 6 of the sections (900 - 1300) are almost | | | | 95% of the time the lender/ loan officer will put |
| exactly the same regardless of who you choose | | | | their profit in the origination fee. It is usually |
| as your lender. The 800 block of fees are the | | | | expressed as a percent of the loan, i.e. 1% 1.5% |
| only fees the lender has direct control over. So | | | | depending on the loan size. Review the profit |
| when comparing closing cost between lenders | | | | chart on the last page for an idea of what most |
| they are the only ones that need to be | | | | lenders are shooting for in profit. In our next |
| considered. I know a lot of LO's that will "skimp" | | | | section we will discuss how to structure your rate |
| on the third party fee's in order to have their | | | | and closing cost. |