Wednesday, April 30, 2014 - Article by: Justin Fitzhugh - Nations Lending Corporation -
Whenever you are thinking about getting a mortgage, you must consider application and closing costs in your decision. These costs vary and are influenced by the type of mortgage you are acquiring, your credit score, the amount of the loan, and the geographic location of the home you want to finance. Generally, these costs will range from 3 - 7% of the total mortgage cost. Below, I list standard charges, and I briefly explain the meaning of each:
you pay this fee at the time you submit your application
this may or may not be a refundable fee; it is the lenders decision. In other words, if your application is declined, you may not get a refund for this payment. The most intelligent thing you can do is to ask the loan officer you want to work with if this fee is refundable before you apply
the application fees may include:
credit reports are provided to the lender by third party credit monitoring agencies. The lender needs these reports to evaluate the borrowers credit history
other document related miscellaneous fees
not always, but in some cases a lender will require the appraisal of the home you want to purchase as part of the application process. If not during the application phase, for sure during the underwriting phase and before the closing. This appraisal is required by law, and it helps establish the market value of the property you want to buy
these fall into two categories, lender related and government related
lender related closing fees:
mortgage processing fee
this fee covers the document preparation and processing of your loan
this fee is more often charged when you work with a mortgage broker rather than with the lender directly. This fee may vary from 1 - 3% of the total mortgage amount
this fee is charged when a borrower wants to ensure the estimate quoted rate applies at the time of closing
this charge covers interest that accrues between the home purchase closing and the beginning of the next month
each point is equal to the 1 percent of the total loan. Points have an inverse relationship to the mortgages rate. If you pay upfront points, the loans interest rate goes down
title insurance protects lenders from mistaken information about the title of the home you want to buy. At the time of underwriting, the lender will perform a search on the propertys title looking for any lien against it. The title insurance protects the lender in cases where the results of this search are mistaken, and previous liens supersede the lenders right over the property
this fee covers the work that goes into the evaluation of all of the information the applicant provides. The underwriters make the decision on whether the loan is approved
tax service fee
this fee covers the lenders verification that a propertys tax payments are up to date
PMI application fee
if you are borrowing more than 80% of the appraised value of your home, you will be required to get private mortgage insurance, PMI. This is required by law. You can get an insurance provider on your own, or you can ask your loan officer to arrange one for you
government related closing fees may include:
state and local government transfer taxes
document recording fees
prepaid property taxes
As I said at the beginning, application and closing fees vary, and as you get ready to purchase a mortgage, you should ask the loan officer you want to work with for a list of the charges you may incur. Home buyers who don't have the cash to pay for these fees at closing time, may finance the fees as part of their mortgage. In this case, closing costs will be included in the total mortgage amount and be amortized over the first few years of the loan.
The Federal Trade Commission, FTC, offers you a mortgage shopping worksheet to help you evaluate mortgage products and lenders as you get ready to borrow. Using the sheet may help make a better choice: https://www.consumer.ftc.gov/articles/pdf-0104-mortgage-shopping-worksheet.pdf
Also from the FTC, you can visit this mortgage consumer guide to continue learning about the mortgage purchase process: https://www.consumer.ftc.gov/articles/0189-shopping-mortgage
Nations Lending Corporation is looking for seasoned mortgage branch managers who want to excel in the purchase market. Our mortgage branch opportunities feature top training, unparalleled marketing support, and the best bundled solutions in the industry. As a direct agency lender, we are a better alternative to any of the mortgage net branch opportunities out there. We offer direct pricing, no middle man. If you are thinking about opening a net branch, learn about our alternative arrangement.
Please visit our website to learn more.
Didn't find the answer you wanted? Ask one of your own.