I don’t want to be overcharged for a loan.
I DON’T WANT TO BE OVERCHARGED FOR A LOAN. HOW DO IKNOW WHAT FEES ARE NORMAL AND WHICH ONES ARE “JUNK” FEES?By Peggy DeVilbissNo borrower wants to be overcharged for a loan, and, with a little knowledge about the normal fee structure, no borrower needs to be.There are three main categories of funds paid at closing that are a part of every mortgage loan:1. Closing Costs – costs of getting the loan2. Optional Fees – for optional programs or features3. Pre-paids – funds needed to start escrow accounts for taxes and insurance.Closing costsClosing costs normally include charges for the following:• credit report – required on all borrowers• appraisal – required report which determines the current market value of the property• flood certification – required report which determines whether or not the property is in a flood zone• survey – usually required only for new construction and large-acreage parcels• ILC (Improvement Location Certificate) – sometimes required• title insurance, title endorsements, miscellaneous title fees• loan documents fee – for the preparation of the loan documents• tax service fee – to set up escrow account and escrow servicing for payment of taxes and insurance• origination fee – usually charged on non-traditional loan programs, or to effect a lower interest rate.Sometimes there are additional fees which apply to specific properties or special loan programs with unique features. These programs are an option for borrowers to consider, and the program fees assessed for them are not “junk fees.” Information about these optional programs and fees will be provided in a separate column.Pre-paidsPre-paids are the funds provided at closing to start the tax and insurance escrow accounts. The amount of funds depends on the closing date in relation to the insurance renewal date and how soon the taxes need to be paid. The funds are impounded in an escrow account in the name of the borrower. When the tax and insurance bills come due, they are paid by the lender, on behalf of the borrower.The prepaids must be paid directly by the borrower. The closing costs can be paid by the borrower, or can be paid by the lender in exchange for the borrower paying a higher interest rate. If money is tight, ask your mortgage broker about this alternative way to pay for closing costs.To help protect yourself from “overcharges,” ask for a good-faith estimate. Review it for the standard fees, and ask for explanation about any fees shown that are not mentioned above. The fee may be customary and ordinary for that particular type loan, but you certainly have a right to ask about it.If you have any questions that you’d like to have answered in this column, please contact Peggy DeVilbiss at 963-9600.If you have any questions that you’d like to have answered in this column, please contact Peggy DeVilbiss at 963-9600.
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