What are Mortgage Junk Fees?

When it comes to purchasing a home very few people can say they have gone through the process of applying for a home loan more than once or twice or maybe a small handful of times. When it comes to home purchases, there are very few buyers with an intimately familiar knowledge of mortgages and the entire home purchase process itself.

Every few years you may turn around to purchase a new home to find the mountain of paperwork to sign and legal jargon becomes bigger and bigger every time to ensure that everything is covered to the best of everyone’s ability.

With this large amount of paperwork in an almost seemingly foreign language that continues to grow with each home purchase, it is easy to lose track of exactly what you were paying and every fee you are being charged. Though it may seem daunting to pay attention to every little extra cost associated with your mortgage when you just want to get the purchase over with, it is well worth it because it could save you a couple of hundred dollars in what is known as junk fees.

An explanation of closing costs

In the simplest of terms, closing costs are anything above the purchase price of the home that a borrower will pay to finalize and close the loan and become the new official owner of a property. Many times, closing costs are put into two categories including recurring costs and nonrecurring costs.

What is a recurring cost?

These are costs that are paid at the closing table and additionally paid monthly in your mortgage payment thereafter. A reoccurring cost can include taxes, homeowners’ insurance, private mortgage insurance, and any interest that may need to be covered during your first few days or weeks of occupation in the home.

What are non-recurring costs?

These costs are also paid at the time of closing but do not come up again over the lifetime of the loan. These costs can include any points that you are paying to receive a lower interest rate, application fees, loan fees charged by the lender including origination/appraisal/credit report, etc. There is also a broker service fee, any inspection fees that were ordered by the lender, and the appraisal fee.

Other closing costs you may be asked to pay

Depending on your type of loan you could also be asked to pay these costs at closing. They include federal housing administration fees, Veterans Affairs fees, rural housing service fees, flood determination fees, land survey fees, and any title charges.

Which fees are junk fees?

Junk fees also sometimes referred to as garbage fees are those that are tacked on to many mortgages that can be negotiated down to a lower price. In some cases, lenders may charge more than competitors for these fees and it is worth talking with them to renegotiate what you would pay. It could save you a significant amount of money.

When you are looking over the fees for your loan make sure to pay special attention to these five categories where some lenders can overcharge. These include application fees, underwriting fees, mortgage rate lock fees, loan processing fees, and broker rebates.

Check over each of these fees and know their exact amount. If any of them seem to be exorbitant it is worth having a conversation or asking the advice of your real estate agent. In some cases, loan applicants have been able to significantly lower these fees or completely eliminate them altogether. Sometimes just the simple act of asking why the fee is at the current amount will get it lowered.

To make sure that you are not overpaying for your closing costs make sure that you find the closing statement in your loan paperwork it could also be titled the closing disclosure. Depending on the specific type of loan and paperwork you will most often receive these three business days before your official signing date. It is a good idea to compare this with your loan estimate paperwork and if the numbers seem to be a bit inflated from your original loan estimate it is a good idea to ask some questions.

For more information on purchasing a home in Granbury Texas and surrounding areas please contact us anytime.