Additional fees that you pay while purchasing a home apart from the mortgage cannot be predicted with a great deal of accuracy. They depend a lot on the location, your state rules, the lender and the cost of the home.However, there are some costs that are common. There is also a range of amount that is charged that is common. These are provided in the table below.
The additional costs listed below are the common guidelines provided by the Federal Reserve Board.
|Application FeeLoan Origination Fee||$75-$300 including credit report for each applicant.1 – 1.5% of the loan amount.|
|Points||0-3% of loan amount|
|Appraisal FeeLender Required Home Inspection||$300-$700$175-$350|
|Prepaid Interest||Varies based on the loan amount, interest-rate and number of days that must be paid. ($300-$750 is common)|
|Private Mortgage Insurance||Up to 1.5% of loan amount to prepay first-year|
|FHA, VA or RHS Fees||1.5%, 1.5% to 2% or 1.75%|
|Home Owners Insurance||$300-$1000 per year pending on home price|
|Flood Determination Fee||$15-$50|
|Source: Federal Reserve Board|
There are other costs that may be levied by your lender while extending you the mortgage loan. While these may the usual fees levied by the lender, some of them may be negotiable and even completely avoidable. Processing fee and application fee is extra profit for the lender. While almost all of them charge it, a bank that you usually do business with may be willing to reduce the charge if not completely waiver it.
Because many people shop around for mortgage, a lender charges an application fee to make the effort of processing your application worthwhile even if you decide to go with another lender for the mortgage loan. However, if you finalize the deal with one, you can ask for the application fee to be removed since it is more profitable for the lender to strike a mortgage loan deal for your rather than charge you the application fee.
Junk fees and extra large amounts can be reduced and avoided.
In the midst of all the people involved in the deal and telling you which paperwork to sign and how much to pay and how it is easy to loose track of the various costs involved. You started out by looking at the cost of the home and applying for a mortgage.
But now you will realize that there are other costs when buying a home that are commonly known as ‘closing costs’. Not only should you understand these costs in order to know exactly how much you are gong to be spending by the time the house is yours but also to save money on these costs.
Recurring Closing Costs
Recurring costs are the costs that you have to pay over the mortgage amount not only at the time of the deal but also on a recurring monthly or annual basis.
These include real estate tax, home insurance and if you are paying less than 20% of the cost selling price of the home as down payment, then Private Mortgage Insurance as well.
Most of these payments are payable in advance. So while the house tax may be valid after one year of living in the house, you are made to pay it in advance during the time of the purchase in order to cover your next years obligation. This is known as putting money in escrow.
Non recurring costs are fees that are paid during the time of the closing of the deal but are one time in nature. You are not required to pay them again. These kinds of cost usually add to the original cost of the home and the mortgage.
Home Loan closing costs include but are not restricted to:
- Fees associated with the mortgage loan like Origination Fee, Appraisal Fee, Credit report Fee, Tax Service Fee, Document Preparation Fee, Wire transfer Fee, Office Administration Fee etc.
- Application Fee by the Lender Broker’s Fee if you are dealing through a Mortgage Broker.
- Any additional service required by the lender such as Pest inspection or home appraisal.
Closing costs may also include:
- Federal Housing Administration Fees.
- Veteran Administration Fees.
- Rural Housing Service Fees associated with mortgages guaranteed by government.
- A flood determination fee to investigate whether the property is in an area prone to flooding.
- A land survey to verify the property’s boundaries.
- Title charge which may include a settlement fee, titles such, title examination, closing service letter, deed preparation, notary fees, attorneys fees and title insurance.
- A host of other miscellaneous costs may include a courier delivery fee, endorsements, recording fee, transfer tax and optional home warranty.
Avoid Extra And Junk Fees On A Home Loan
It is easy to end up paying more that you have to for a home because of all the extra fees that are attached to a mortgage loan. Many of them can be reduced if not avoided all together.
For most people, taking out a mortgage to buy a home is not something that happens many times in a lifetime. Because of this people are usually unaware of the procedure involved. You mostly depend on the information given by loan agents and lenders on procedures, paperwork and fees.
The different charges and fees you have to pay differs by the location, the lender and the value of the home that you are purchasing.
The fees levied by lenders and other individuals involved such as the mortgage broker and real estate agents are variable. Certain charges billed to you by your lender such as processing fee and application fee can be negotiated on once you have decided which lender to use for the mortgage.
The extra charges that are levied by the government such as the Federal Housing Administration fee And the Veteran Administration Fee are usually unavoidable and non-negotiable. You just have to absorb these costs in the total amount of your mortgage with a pinch of salt.
The extra charges and fees levied by the lender or the broker that are not a prerequisite of any government or federal law are usually termed as ‘ garbage’ or ‘junk’ fees.
If any charge seems uncommon or the amount seems to abnormally inflated you can question it and check it up. While the junk and the extra fees may or may not be wholly avoided they can be reduced and the inflation of your mortgage minimized.
Watch out for excessive processing and documentation fees in the following:
- application fee
- underwriting fee
- mortgage rate lock fee
- loan processing fee
- broker rebate
Additional fees that are charged by the broker of the lender can usually be negotiated upon. It may seem odd to do this but even the mere act of questioning the fees may be successful in getting your reduced or a waiver of the additional charge.