"Program fees" are not junk fees
“Program fees” are not junk feesLoan fees, part 2By Peggy DeVilbissAs mentioned in a previous column, there are reports and services that are standard for all mortgage loans, and the fees for them are not considered “junk fees.”To recap, normal closing costs include fees for credit reports, appraisal, flood certification, survey, Improvement Location Certificate, title insurance and related fees, loan document preparation, lender underwriting, and tax/insurance escrow service fees. An origination fee is frequently paid in order to obtain a lower interest rate.In addition to these standard costs, there are “program” fees that are usually assessed by the lender when a special lending program is required in order to secure a loan. (These fees are sometimes called “optional” fees.)The terms “conforming” and “nonconforming” are commonly used in the lending business. A “conforming” loan means that the loan elements, the borrower and the property all conform to the lending guidelines set by the Federal National Mortgage Association, commonly known as “Fannie Mae.”A “nonconforming” loan means that one or more elements of the loan, borrower or property do not conform to Fannie Mae guidelines. There are many lenders who offer loan programs which are specifically designed to handle “nonconforming” loan situations. These loans are considered higher risk, however, and the lenders usually charge a program fee and/or a higher interest rate to cover the risk factor. Loan elements which put a loan into the “nonconforming” category and create a higher risk factor are as follows: high loan amount, high loan-to-value of the property, poor or bad credit, no credit, unpaid liens, new job, new self-employment, unverifiable income, recent bankruptcy or foreclosure, no savings, unverifiable savings, no down-payment money, unverifiable rent history, unique construction, high-acreage property, unfinished construction or property in poor condition.It is usually beneficial for a borrower to pay the extra fee or the higher interest rate in order to purchase a home and gain the advantages of home ownership. The best action for the borrower is to then use the next two to three years to take care of the nonconforming elements, watch the rates, and then refinance at the best time to take advantage of low rates and conforming programs.With today’s multitude of special loan programs, most people can qualify to purchase a home, either immediately or within a short period of time. They just need to know what steps to take.To learn what loan programs are available and what steps to take, contact a mortgage broker. This loan specialist can help you know exactly what to do for your specific situation, and develop a plan for you to qualify for the best programs and rates.Contact me at any time regarding information presented here, or with suggestions for future articles.
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