“Money often costs too much” is a famous quote from Ralph Waldo Emerson. While he meant it in a philosophical sense, it’s true in the financial world as well. If you are purchasing a home or refinancing one, you know this to be the case. You are wanting to borrow money for your home but it also costs money to borrow the money. Huh? Yes, it’s complicated. Let’s try to clear up why that is.
When you apply for a home loan, there are several agencies that are required to be involved in the transaction. Accordingly, everyone charges a fee for their service. Here are a few of the most common fees associated with getting a mortgage loan. Keep in mind that the amount of fees and whether or not the fee is being charged (depending on service requirements) vary by transaction and depend upon the specific situation.
Mortgage Loan Fees
Credit Report Fee: Every lender must review the credit history for home loan applicants. The report is needed to review your credit history (payments made on time) and the debts carrying a balance. The fee for this report runs $25-$75. Upon request, a copy of your credit report can be provided to you.
Application/Origination/Underwriter Fee: Depending on your lender, these fees can be charged as one fee or separate fees. These fees are associated with the lender’s costs for processing your loan, underwriting the loan and any other internal services the lender will need to complete your loan.
Appraisal Report: The collateral (security) for your loan is the property. Accordingly, a report needs to be completed by a licensed, independent appraiser. This report can cost anywhere from $500-$800 depending on the property location and the loan type. You will receive a copy of this report for your records.
Home Inspection/Termite Report: When you purchase a home, it’s a good idea to have an independent report completed to inspect the property for any structural defects or maintenance problems or active bug infestations. These reports can cost $125-$300 each. Some refinance loans require these reports. Check with your loan officer for more details.
Lender’s & Owner’s Policy: Making sure that the owner has the right to transfer the property to you is an important factor. The owner’s title policy is there to ensure that the transaction is valid and that there aren’t any surprises that can impact your ability to have clear title to the home. The lender’s policy makes sure that the lien the lender is placing is also valid and clear. The costs for these policies can run $350-$2,500.
Settlement or Escrow Fee: A settlement agent is used to ensure that the final closing papers are in order and that all the terms have been met. The fee for this service is usually $350-$600.
When you apply for a new loan, there are costs associated with the new loan itself. These are costs that go to your lender, insurance carrier or the county tax collector. These are costs paid in advance and are prepaid to the appropriate agency.
Mortgage interest is always collected in arrears. That’s a fancy word for meaning the payment is made at the end of the pay period and not prior to it. Depending on when your insurance is due, the premium will be collected at the closing to pay to the provider. And your tax installments, depending on when they are due, might need to be collected in advance and paid to the appropriate agency. All of these are considered part of the total closing costs, but are specific fees collected to be paid in advance to the appropriate agencies.
This list is just a brief overview of the costs associated with getting a new loan. To discuss any of these fees, contact your PMG Home Loan specialist and they will review all the costs and home loan options available to you.