When applying for a mortgage it is important to compare mortgage fees to get the most competitive interest rates and closing costs. Many homeowners mistakenly assume choosing the mortgage with the lowest rate guarantees them the best deal. These homeowners frequently overpay because they do not compare mortgage fees. Properly comparing mortgage fees will help you avoid the majority of mistakes homeowners make. Here are several tips to help you compare mortgage fees to ensure you do not overpay for the loan.
Compare Mortgage Fees: Check Loan Processing Fees
The best way to compare mortgage fees is by using the Good Faith Estimate. Mortgage lenders are required to provide this document to you after you apply for the loan; however, most mortgage companies will give you a copy if you ask. Locate the loan processing fee on the Good Faith Estimate and determine who the fee is paid to. Loan processing fees are often paid to a third party; however, this fee should not be higher than $400.
Compare Mortgage Fees: Loan Origination Fees
The next item to look for when comparing mortgage fees is the origination fee. If the mortgage is for a home you will live in the origination fee, often referred to as “origination points,” should not be more than 1% or 1.5% of the amount you are borrowing. If the mortgage is for an investment property the origination fee should not be more than 2% or 2.5% or the loan amount.
Compare Mortgage Fees: Watch out for Junk Fees
Mortgage companies are notorious for lining their pockets at your expense with junk fees. When you compare mortgage fees look for anything on the Good Faith Estimate that resembles a mortgage broker administration fee, computerized loan origination fee, lock fee, mortgage application fee, or courier fee. These are unnecessary junk fees you should never pay. If your mortgage company refuses to remove these fees, find one that does not pad their loans with junk fees.
When you carefully compare mortgage fees from a variety of lenders it will ensure you do not overpay for your next mortgage loan. You can learn more strategies to compare mortgage fees and avoid costly mistakes by registering for a free mortgage tutorial.
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.
