A Comprehensive Breakdown of Common Mortgage Fees
Common Mortgage Fees
Mortgage fees — also referred to as closing costs — are the total costs of all expenses involved with attaining your mortgage.
You can get a good idea of what your mortgage fees will be from the estimate that your mortgage lender gives you. When you close the loan, you will receive a closing statement that will tell you the exact amount of the costs that you will have to pay at closing.
Here is a comprehensive breakdown of common mortgage fees and what they mean. Some of them are recurring (meaning that there is more than one payment on that expense) and others are non-recurring. Every loan, lender, and location is different, so not all of these fees will apply to your loan.
What Do The Fees Mean?
Here is a comprehensive breakdown of common mortgage fees and what they mean. Some of them are recurring (meaning that there is more than one payment on that expense) and others are non-recurring. Every loan, lender, and location is different, so not all of these fees will apply to your loan.
Administration Fee: Paid to the lender for costs such as the compliance review and quality control review.
Application Fee: This fee is paid to the lender for processing your application. You should ask your lender if the fee covers anything else, since it can also include appraisal fees and the cost of pulling the credit report.
Appraisal 442 Review: If an appraisal notes any repairs that must be made prior to closing such as the installation of a CO detector, water heater, or earthquake straps, an appraisal 442 review fee is paid to the appraiser to ensure that these repairs have been made.
Appraisal Fee: When you buy your home, you will be required to get an Appraisal to determine the home’s market value. If you do not pay for it at the time of service, it will be included in your mortgage fees. The size of the property, location and the type of property are a few of the many things that can affect how much your appraisal fee will cost.
Appraisal Desk Review: If requested by underwriting, this fee is paid to a 2nd appraiser to review the original appraisal without visiting the property location (i.e. from their desk).
Appraisal Field Review: If requested by underwriting, this fee is paid to a 2nd appraiser to review the original appraisal by conducting a field review (which means visiting the property itself).
Archive Fee: The archive fee is paid to the escrow company to store documents and records related to the transaction.
Closing Fee or Escrow Fee: Your closing fee is paid to whichever independent third party is handling the closing. This will be either an escrow or title company.
Condo Project Approval: This fee is paid to a condo review professional to certify that a condominium project is approved under the loan’s underwriting guidelines.
Courier Fee: This charge covers the transportation of your loan documents between different parties involved in the loan process such as county recorders, the seller, title companies, and lender companies.
Credit Report: To decide your rate, your lender will pull a tri-merge credit report (a credit report that pulls information from the three major credit repositories: Equifax, Trans Union, and Experian). Be cautious of your credit raising any red flags and be prepared with ways to repair it. You may be charged for credit report or as a part of other closing costs.
Document Preparation Fee: This fee is paid to the escrow company for document handling tasks such as the receiving electronic loan documents, printing, and copying.
E-Recording Fee: This fee is paid to the title company for coordinating electronic recording with the county.
Escrow Deposit for Property Taxes & Mortgage Insurance: Your lender may have you make a deposit towards an impound account, which will be used for paying off property taxes and mortgage insurance premiums. Take a look at our post on impound accounts to learn more.
FHA/HUD Up-Front Mortgage Insurance Premium (UPMIP): Loans under the FHA program require the borrower to pay an up-front premium. At the time of this post, the rate is 1.75 percent of the base loan amount. This premium has the option of being folded into the overall loan amount.
Flood Determination: This is a fee paid to a third party to determine whether or not your home is in a flood zone. If your home is found to be in a flood zone, you are required to pay for flood insurance.
Flood Insurance Premium: In the event that you are required to pay for flood insurance, you will have to pay a premium to the insurer. If you are purchasing your home, your premium will be equal to one year’s worth of flood insurance. If you are refinancing, you will only be required to pay the amount that is due by the time of closing.
Flood Insurance Reserves: These funds are held in an impound account by the lender to pay off future flood insurance premiums. The monthly amount is included in the loan payments as well.
Funding Fee: Paid to lender for funding costs such as wire fees, document preparation, and funding review.
Home Inspection: Your home will be inspected to determine the condition of things like the home’s roofing, electrical system, plumbing, fireplaces, and other factors that can affect the safety of living in that home. If not paid at the time of service, your home inspection fee will be a part of your mortgage fees.
Home Warranty: Purchasing a home warranty from a home warranty company can protect you from unexpected failures of the property’s major systems (A/C, plumbing, electrical, etc.) and appliances in the property.
Homeowner’s Association Certification Handling/Transfer Fees: If your home is in a community that is part of an HOA, there will be transfer fees to cover transition expenses of the HOA. The transfer fee also covers the collection of information for the borrower to show that dues are paid current, what the dues are, minutes and notices, and a copy of association financial statements.
Homeowner’s Association Master Policy Charge: Fee paid to HOA or insurance agent for loan-specific HOA master insurance policy (which is an insurance policy for that HOA’s entire community).
Homeowner’s Insurance Premium: Homeowner’s insurance covers potential home damages. If you are purchasing your home, you will be required to pay a year’s worth of insurance payments as part of your closing costs.
Homeowner’s Insurance Reserves: These funds are held in an impound account by the lender to pay off future homeowner’s insurance premiums. The monthly amount is included in the loan payments as well.
Lender’s Policy Title Insurance: This is insurance paid to your lender to ensure your homeownership and the validity of the lender’s mortgage. It protects lenders from any problems with the title, such as people claiming that the home is in their name.
Lead-Based Paint Inspection Fee: If the home you’re buying was built before 1978, it has the possibility of containing harmful lead-based paint. This means that an inspection will be required to ensure that the home is safe to live in. The price of this will be based on the size, age, and condition of the home as well as the amount of painted area in the home.
Loan Discount/Origination Points: Loan discount points are prepaid interest on your loan. With one point being the same as one percent of your loan, you can take advantage of these to lower your monthly mortgage payments.
Loan Tie-In Fee: In the event that there is more than one lender, this fee is paid to the escrow company for additional processing involved with the loan.
Mortgage Insurance Premium: This is a fee that is paid to the mortgage insurance provider for conventional loans with a loan-to-value percentage of 80 percent (in other words, the borrower either has less than 20% equity or is putting less than a 20% down payment). It can either be paid upfront at closing or folded into the overall cost of the loan.
Natural Hazard Disclosure: This fee is paid to the natural hazard disclosure company for reporting any concerns related to the property involving natural hazards, taxes, and the environment.
Notary Fee: Sometimes included in the title charges, the notary fee goes to the notary, who assists in signing and notarizing your documents.
Origination Fee: Your lender may charge an origination fee for paperwork, verification, and calculations. Origination fees can cover different things depending on the lender you are with and are often times negotiable. Ask your lender what their origination fee charges entail and if they can be waived.
Origination Credit: Used to reduce closing costs, this credit is issued by the lender to the borrower for choosing a higher rate.
Owner’s Policy Title Insurance: An optional fee that protects you from challenges to your ownership of your home.
Per Diem Interest Charge: Paid to the lender, this fee covers the daily interest accrued from the date of funding until the end of the calendar month. If the loan is funding early in the month and the documents were drawn in the prior month, this can be a credit.
Pest Inspection: Required in some states and government loans, the pest inspection evaluates your home for termites and dry rot. If dry rot, termites, or wood damage is found, you may be required to repair the damages before you can receive your loan. The price is determined by the square footage of your home.
Prepaid Interest: This covers the interest that accumulates between the loan’s closing date and your first mortgage payment.
Private Mortgage Insurance (PMI): When you make a down payment that is less than 20 percent of your home’s value, you will most likely be required to pay for mortgage insurance. The first month of PMI is typically paid at closing. If your situation doesn’t apply to this scenario, you may be able to avoid mortgage insurance.
Processing Fee: This fee is paid to your lender for preparing and verifying information, creating documents, and communicating between title companies to close your loan.
Property Taxes Currently Due: If your first property tax payment is due within 60 days of purchasing your home, then your lender will most likely require you to pay it off at closing. Your property tax rate is influenced by both the state and the county that you live in.
Property Tax Reserves: These funds are held in an impound account by the lender to pay off future property tax installments. The monthly amount is included in the loan payments as well.
Recording Fees: Fee charged by the county/city for registering (or recording) the home purchase/sale as a matter of public record.
Roof Inspection: Separate from the home inspection, this fee is paid to the roof inspector to certify the current condition of the property’s roof when it is requested by the Appraisal.
Sales/Broker Commission: This fee is paid to real estate agents at file disbursement and is typically charged to the seller.
Septic Inspection: Separate from the home inspection, this fee is paid to a septic inspection company to certify the current condition of the property’s septic system. This only applies to properties that are not connected to any municipal sewer systems.
Subordination Fee: If you want to refinance the first mortgage on a property with a second mortgage, you must get the lender of the second mortgage to agree to subordinate. This means that the lender of the second mortgage agrees to allow the first mortgage to be paid off in full first in the event of bankruptcy or defaulting on payments.
Sub-Escrow Fee: Paid to the title company for coordinating the exchange of funds between the title and escrow company.
Survey Fees: Depending on which state you live in, you may be required to have a property survey performed to verify the property lines and fences.
Tax Service Fee: If you have an impound account, your lender will likely include this fee in your closing costs to hire a tax service agency for your loan. This tax service agency will then provide your lender with your property tax bills to ensure that the taxes are being paid since unpaid property taxes can lead to a lien being placed on the home.
Title Company Title Search/Service/Exam Fee: Paid to the title company, this fee covers the cost of the title’s search of your property records and deed to ensure that there are no other claims on the house.
Title Endorsements: Fee paid to the title company for additional items needed in the lender’s title policy, such as water rights or condo parking rights endorsements.
Transaction Coordinator Fee: Paid to the transaction coordinator for managing the transaction for the real estate companies.
Transfer (Excise) Taxes: This tax is for when the title of the home transfers from seller to buyer.
Underwriting Fee: Paid to the lender, this covers the cost of determining whether or not your loan will be approved. Not all lenders charge this fee.
VA Funding Fee: For VA loans, you will have to pay a funding fee, which is then used to fund the VA home loan program. Surviving spouses of those who died in service or from service-related injuries, anyone entitled to compensation that isn’t drawing retirement pay, and those receiving disability compensation for service-related medical issues can typically waive this fee. The price of this fee is determined by the down payment made on the loan and which type of service the borrower participated in, as there are different rates for reserves and the National Guard than for regular military members. Learn more about these rates here.
Wire Transfer: Wire transfer fees cover the cost of transferring incoming and outgoing funds from parties involved with the loan, such as escrow, title, and previous lenders.
Review Your Disclosure Thoroughly
Lenders are required to provide you with TILA-RESPA Integrated Disclosures, which come in the form of a loan estimate and as a closing disclosure. You have access to the closing statement 24 hours before your loan closes, so it is a good idea to ask your lender for your copy and compare the costs from the estimate to what the closing disclosure says.
If there is a sizable difference between the two disclosures or if you see any suspiciously high fees, ask your lender about them to make sure that you are not being overcharged.
Originally posted at https://www.rwmloans.com/a-comprehensive-breakdown-of-common-mortgage-fees/
Financing details are for educational purposes only. Rates, program terms, fees, and conditions referenced are subject to change without notice. Not all products are available in all states for all amounts. All mortgage applications are subject to underwriting guidelines and approval. This is not an offer of credit or a commitment to lend. Residential Wholesale Mortgage, Inc. dba RWM Home Loans is an equal housing lender licensed by the CA Department of Real Estate #01174642 and CA Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. NMLS# 79445
Originally posted at https://rwmloans.com/blog/what-are-mortgage-fees-a-comprehensive-list
