| In part one of this series we discussed each of | | | | expenses are identical to what the estimate |
| the individual mortgage expenses. Here, we'll take | | | | showed. |
| a look at how mortgage fees are charged in a | | | | Let's take a look at how this works in practice. |
| little more detail, including an example explaining | | | | Ben Borrower needs a loan on a $200,000 home. |
| how these fees work in practice. | | | | He goes to Larry Lender and applies for a |
| To recap part one, some of the most common | | | | mortgage. To apply, Ben is required to pay $250 |
| mortgage expenses are: Application Fees, Credit | | | | upfront to cover both the application fee and the |
| Report Fees, Loan Origination Fees, Discount | | | | credit report fee. Ben gets approved and |
| Points, Appraisal Fees, Title Insurance, and others. | | | | immediately receives his good faith estimate. This |
| It is vital to keep an eye on what you're being | | | | estimate shows that an appraisal will cost $500, |
| charged for in terms of your mortgage expenses, | | | | and his loan will include a $500 origination fee, plus |
| which can often reach 3% of the loan amount | | | | 1 discount point. There will also be a $250 charge |
| ($6,000 on a $200,000 home!). One of the | | | | for title insurance. When everything goes through |
| reasons it's so easy to overlook mortgage | | | | the loan closes, Ben and Larry meet to finalize his |
| expenses is that they are often added onto your | | | | loan. Instead of financing $200,000, including the |
| final loan amount. When you finance your | | | | fees, Ben's loan amount is now $203,250. |
| $200,000 loan, you may actually be financing the | | | | The example above is, of course, completely |
| loan plus the expenses for a total of $206,000. | | | | fictional and you should check with your lender for |
| To protect consumers from dishonest lenders, | | | | a full disclosure of their fees. |
| there are federal requirements that ensure you | | | | Since getting a mortgage can often cost you 3% |
| know exactly what you're being charged for | | | | of your loan amount, it's important to keep a |
| when taking out a loan. Before you ever sign an | | | | close watch on what you're paying for. Look for |
| official loan document, you will be presented with | | | | the categories of expenses listed above, read |
| a GFE (Good Faith Estimate) that shows what | | | | over your Good Faith Estimate carefully and hold |
| your closing costs will be. Bring this estimate with | | | | your lender to the exact terms and conditions |
| you at your loan closing to ensure that the actual | | | | that you have been promised. |