The use of fees can be confusing but with a little bit of effort you can easily reduce the costs. Start by looking at the fees or costs; what fees are legitimate, and what fees you should be wary of, with a few lessons of wise financing along the way.
The origination fee - Actually this fee is pretty straightforward and is what the broker charges for arranging the loan. A fair and normal fee is usually in the neighborhood of 2% or less. With a more competitive market fees should be examined and depending on how complicated your loan is a 2% fee would be considered expensive, so if this is the case you should look elsewhere. Unlike the frenzy encountered a couple of years ago, brokers need and want your business so now is the time to choose carefully who you want to work with. Lesson number one: this is a significant debt you are undertaking, ask questions and don't let yourself be intimidated into paying more than you should!
The appraisal fee - This is a fee that is unavoidable for the purchase or refinance of any home. An appraisal must be done by a licensed appraiser. You are paying for it so be sure to obtain a copy of the appraisal for your own records. The cost for the appraisal can be in a range from $300 to $500, depending on the state and the appraiser.
The processing fee - A hired loan processor or an outside source may be used by a broker to process your loan. This fee is not a junk fee because the processors handle all the detail tasks for the loan. They work hard at ordering the title, the insurance,
the appraisal and putting together all the documents for the lender. Examine your closing documents to make sure your fee is no more than $400.
The credit report - Every borrower is required to have a credit report if they hope to get a home loan. You must take care in choosing a broker because most of them will pull a credit report as soon as your social security number is presented and a large number of inquires on your credit can hurt your credit score. When arranging a a lender may pay for a credit report based on you so you must make sure you get a copy and to ensure that your broker has actually paid for in order to charge yourself. The brokers cannot charge a credit report fee unless they are actually being charged a fee by the credit agency. The fees normally range from $12 to $20 per borrower.
The underwriting fee - This fee is charged by the lender for underwriting, closing and funding your loan. Sometimes referred to as the Administration Fee, this is how the lender makes its up-front profit on your loan and it usually can't be avoided. If the broker is charging the underwriting fee you should not agree to pay it without a reasonable explanation of its validity because brokers do not underwrite your file. Don't be confused into paying any fees that don't seem to be honest charges. Ask tons of questions to secure the best deal on your home loan. Most brokers are aware of the state of the current market and will offer you the best deal.
