Great question and while we always suggest that a buyer chat with their lender about this portion of the homebuying process…..here is a quick review of typical loan fees involved when buying a house.
Most loans do have some fees involved in addition to the total amount you are borrowing to finance your home. You can sometimes borrow the money needed to cover these fees, but that will obviously increase the overall amount of debt you undertake. A buyer can also negotiate to have the seller pay some of these fees at closing. Each loan program is different. Each borrowers’ situation is different and every contract negotiation is different! Ask your lender questions! Not sure what questions to ask? You can find 20 Great Questions to Ask Your Lender here.
The lender or mortgage broker can charge you points on your mortgage. One point equals 1% of the loan amount. These are simply fees paid to the lender or broker that are often linked to the interest rate, and are usually paid to the lender or broker at closing. A lender may offer you a lower interest rate, but charge more points, so it’s important to compare offers.
Loan Origination Fees
The institution that actually loans you the money will generally charge an origination fee for processing the loan. They are often expressed as a percentage of the amount of the loan. These too vary from lender to lender.
Certain lenders will charge a fee to investigate your creditworthiness and determine if you are likely to repay your loan. Underwriting fees are common and also vary from lender to lender.
Typically paid at closing, a mortgage broker may charge you a fee in addition to the origination fee. If you are working with a broker, be sure to ask them if they have a fee, and be sure you know what that fee is.
Never hesitate to question a fee that you don’t understand. Your lender should give you a thorough explanation and make sure that you know what you’re paying for. For better understanding, ask your broker or lender to quote you a dollar amount—rather than just a number—on any points you are being charged on the loan. Sometimes lenders lump fees together. You can ask for a breakdown of those. Certain fees, like the broker’s fee or the number of points assessed on a loan, are negotiable. It never hurts to ask your lender if they can get you a better deal.
In addition to the above loan fees, you will usually have to pay a fee to have your credit report pulled which can cost between $50-100. You will also need to pay for an appraisal. The cost of this varies but good to budget at least $1,000. Both the credit report and the appraisal fees are normally collected upfront. Looking for a great lender or an estimate on all of the above, give us a call!