The mortgage processing fee is not typically a junk fee found on your Good Faith Estimate (GFE) or HUD-1 Settlement Statement.
This is a fee paid to the mortgage company or loan processor for services related to preparing your loan application. Just because loan processing fees can be legitimate doesn’t mean that some mortgage brokers won’t abuse this fee.
Here is what you’ll need to know to avoid paying too much for your mortgage processing fees while avoiding other junk fees on your next mortgage loan.
Mortgage Processing Fee Defined
The mortgage processing fee should cost you no more than $500; however, $300 is more reasonable amount to pay. This fee should be clearly disclosed on your GFE and HUD-1 Statement. If you see that the fee is being paid to a third party on your loan documents this simply means that your mortgage company outsources preparing their loan documents.
What is the mortgage processing fee for? “Mortgage Processing” covers preparing all of the information for your application, verifying information, creating documents to the lender’s specification and facilitating closing between the loan under writer and title when necessary. Should you pay this fee? There is a lot of work that goes on behind the scenes in preparing your loan application and mortgage processors deserve to be paid for the work they do in putting your loan together. Some people call the processing fee a mortgage junk fee; however, there is some merit to this fee and the ability to close your new mortgage without a hitch.
If your mortgage broker is quoting you $900 or more for mortgage processing fees it’s probably not worth your time to try and talk this fee down; you’ll be better off finding another mortgage broker.
Mortgage Junk Fees
What are other mortgage junk fees and how do you avoid them? Mortgage junk fees are any fee you encounter that serves no purpose but to increase the profit margin of the person arranging your home loan. Mortgage brokers get paid for their services in two ways: fees paid by you and fees paid by your mortgage lender. Brokers get paid a fee by the mortgage lender for increasing your mortgage rate, often without telling you and from the origination fees disclosed on your Good Faith Estimate and HUD-1 Statement.
A reasonable amount to pay for the loan origination fee is one percent of your mortgage amount, provided the person arranging your loan is not marking up your mortgage rate on top of the origination fee. Other junk fees that serve no purpose whatsoever include broker courier fees and mortgage rate lock fees. There simply isn’t a single mortgage lender out there that charges a fee for locking in a mortgage rate. If your mortgage company or broker is charging you a mortgage rate lock fee you can be certain that you’re dealing with a dishonest person or company and should find someone else to arrange your next home loan.
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My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
