Mortgage Junk Fees Defined

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August 15th, 2008

Junk fees will not be a percentage of your loan amount but will show up as itemized charges ranging from $50 to $1,000 on your Good Faith Estimate and HUD-1 statement.

These fees are mostly invented by your mortgage broker and vary from one shady broker to the next. Here are several tips to help you recognize and avoid paying these unnecessary fees on your next mortgage loan.

The easiest way to spot them is to compare the Good Faith Estimate and Statement to see how many of the fees listed are being paid to the mortgage broker.

Definition: Mortgage junk fees are the fees you’ll pay at closing to the mortgage company or broker for no good reason other than boosting income for the person arraigning your loan.

The person arranging your mortgage gets paid by charging you an origination fee and by marking up your mortgage rate…often at the same time. On top of this they may charge a loan processing fee of as much as $400.

There are a number of other charges you’ll find on your Good Faith Estimate that are paid to third parties like your title company. These third party fees are usually legitimate and are standard from one broker to the next in your State. Your title company for instance charges a fee to close your mortgage loan and lenders charge underwriting fees when approving your mortgage.

Keep a close eye on your appraisal fees and credit report fees if they are being paid to your broker. Mortgage brokers often mark up these services and pocket the difference after the third party companies have been paid. You can keep your mortgage broker honest by asking to see an invoice for any charges paid to third party companies.

You can learn more about refinancing your mortgage without paying junk fees or the unnecessary markup of your mortgage rate by registering for my free video tutorial using the links found at the top of this page.