Fees Associated With a Mortgage
- Understand all closing costs before signing mortgage documents.signing a contract image by William Berry from Fotolia.com
Although most fees associated with a mortgage are legitimate, others are avoidable and unnecessary. According to the Federal Reserve Board, mortgage lenders are required by law to provide home buyers with a "Good Faith Estimate" of closing fees within three days after making a loan application. Home buyers should closely analyze HUD-1 closing cost forms before signing any documents and compare them with the Good Faith Estimate in order to avoid any unnecessary costs. - Some fees associated with a mortgage are one-time-only costs that buyers pay at closing. Legitimate fees might include application costs, loan fees, home inspection and appraisal costs, title fees, land-surveying costs, and payments to mortgage brokers or housing organizations such as the Federal Housing Administration, Veteran's Administration or Rural Housing Service.
- Other fees associated with a mortgage occur on a regular basis once the home is purchased. These are usually charged on a monthly or annual basis. Such fees include real estate taxes, mortgage insurance, flood insurance and other homeowner's insurance costs. According to the Federal Reserve Board, some lenders require home buyers to set aside funds in advance to ensure monthly payments are made on time. This money is held by the lender or the lender agent in what is commonly called an escrow account, otherwise, home buyers simply pay these costs on a monthly basis.
- Other mortgage fees, although common, are sometimes unnecessarily high and often avoidable. Loan processing fees, for example, are a common closing cost, but if they exceed $400, they may be illegitimate according to Family Resource. Other examples of common "junk" fees include underwriting charges, mortgage broker fees and application fees. If these costs seem higher than average, bring them to your lender's attention before closing.
