Small Print Fees Can Be Big Time Expenses
By David W. Stoudt
When shopping for a home mortgage loan, it’s very important to speak up and request a full list of fees that will be charged in the process of securing your financing, not just the lender’s upfront fees. Many dollars are spent along the way to getting a home mortgage, and not all of them are assessed by the lender. But they can be substantial just the same, and very unpleasant surprises along the way if you’re not prepared for them.
The most commonly known fees are the application fee and discount points. The application fee usually covers the lenders expense for pulling a credit report and having the property appraised. Although some lenders do charge a separate appraisal fee, usually when they deal with a large number of fee appraisers. Discount points are associated with the interest rate scenario a borrower chooses. To secure a lower interest rate, more points are charged as an upfront fee usually paid at closing. For borrowers who are strapped for cash, opting for a higher interest rate with fewer or no points is a better way to go. Past these two well known evils of the mortgage application process, there are other fees that many people are not aware of, and they can add up to a handsome sum much to the surprise of the potential homeowner. For instance, every lender requires that the title to the property be properly researched and any outstanding issues that may supersede their first lien position be resolved. The end product to this process is a title insurance policy providing the lender coverage up to the amount of the mortgage, and the home buyer up to the purchase price of the property. There is a fee for an attorney or title company to provide this insurance policy, and it can amount to thousands of dollars. But this insurance is a necessity and guarantees recovery of any losses in the unlikely event that a previously unknown lien arises to claim ownership of the property. Every mortgage lender requires title insurance, and you, the borrower, pay for it.Another fee that often takes people by surprise is private mortgage insurance. This insurance coverage is usually required when the home buyer is putting little or no money down toward the purchase of the home, thus requiring all the purchase proceeds to come from the mortgage lender. Since it has so much invested in the deal, the lender will require the home buyer to secure private mortgage insurance coverage, also known as PMI. While purchased on the home buyers dime, only the lender benefits from this insurance coverage. This insurance, which often requires both a lump sum payment up front as well as additions to the monthly mortgage payment, guarantees the lender will be made whole in the event the home buyer walks away from the property and the debt, and the lender is forced to foreclose and resell the property.There are also the miscellaneous fees that wiggle their way into the mortgage financing process. Prime examples of these would be fees to record the mortgage documents, courier fees, and per diem (per day) interest charges. That would be the interest accrued based on the full mortgage amount at the agreed upon interest rate for however many days it is from settlement until the first of the month covered by your first payment. Oh yes, lenders don’t miss a trick, and they will charge you for every day you have their money.If this is a bit confusing, take heart. Every mortgage transaction is required to produce a document called a Good Faith Estimate. This is a form prepared by the lender and given to the prospective home buyer outlining the basic terms of the mortgage they’re applying for and all of the fees that will be incurred in the process. Federal regulation requires all lenders to provide prospective customers with this form so you’ll know exactly what you’re in for. If your lender doesn’t provide you with a Good Faith Estimate of Closing Costs, ask for it. They are required to provide one. This will give you a very good idea of what kind of cash you need to bring to the table if you want to buy or refinance a home. For additional information, there are many websites that are very reliable sources. One such site is http://homemortgage4u.homestead.com.AUTHOR BIO:
Based in Camp Hill, Pennsylvania, where he has lived for more than thirty years, Mr. Stoudt is a writer and web designer with several internet marketing and retail interests on the side. Prior to this career, he spent twenty plus years as a mortgage banking executive serving as vice president of a major central Pennsylvania commercial bank. His websites include (<a href="http://homemortgage4u.homestead.com">homemortgage4u.homestead</a>, <a href="http://www.4freepublicrecords.com">4freepublicrecords</a> and <a href="http://www.youcanfindanyone.com">youcanfindanyone</a>).
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