ThomasGoodwin.com

Whether you are buying or refinancing a home, the mortgage loan process is probably the least amount of excitement you can have and still feel good about the end result - owning a home, building equity, and having a possible tax deduction for the interest that you pay.

But there are fees that can chip away at that happy, responsible home owner feeling. If you see these fees listed on the Good Faith Estimate (that every lender is required to provide to you), you should ask to have them removed or shop around for better deals;

Underwriting Fee
Processing Fee
Non-refundable Loan Application Fee
Document Preparation Fee
Appraisal Review Fee
Loan Origination Fee or Mortgage Origination Fee

There are probably several others that I just haven’t come across. In fact, some of the above can be called different things. What’s important to know is that the lender is trying to pass costs along to you and you are trying to get the loan for as little cost as possible.

For instance, if the lender charges every borrower a $300 underwriting fee, what they have essentially done is used your money to cover their overhead expenses, especially since most underwriting is automated to a great extent and the underwriters only review marginal cases in many banks.

You probably will not be able to get out of paying any of the following fees:

Flood certification fee
Recording Fees
Title Insurance (for the lender)
Title Exam or Title Search
Appraisal Fee
Credit Report fee

The recording fees are those that the bank incurs to “go down to the courthouse” and file the mortgage/lien on the property. It’s essentially a tax that county governments charge, or tax, to keep track of who owns property and who has a loan on the property. When you go to sell property you will pay a conveyance fee (at least in Ohio you will) and it’s usually based on the sale price. Some lenders will waive the credit report fee, I listed it under the “non-negotiables” because it’s usually only about $16. And when the bank is trying to sock you with $175 underwriting fees and $300 processing fees, why fight over the $16 charge… go after the bigger ticket items.

I recently went to refinance and I liked my new interest rate, but I didn’t like that it was going to take over two years to recoup my closing costs in the reduced monthly payment. (What I mean is, if my payment went down $100 by refinancing but I had to incur $2,400 in closing costs on the loan to refinance, it would take me 24 months to recover my closing costs in that lower rate loan and lower monthly payment.) The loan officer was able to knock off the $175 underwriting fee without even going to his manager or consulting with anyone… so the loan officers have some say in the fees. Just make sure you tell them you will be shopping around for the best deal (and stress to them that by “best deal” you mean in terms of lowest closing costs AND lowest rates).

As always, I welcome your comments and feedback…