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Guest Post: 4 Home Loan Fees to Be on the Lookout For

February 9, 2012 · Filed Under Random · Comments 
Today’s post has been contributed by Sara Lennon on behalf of Merlin Insurance – the Quebec Insurance Broker.

For most people, buying real estate is something you do once or twice in your lifetime, giving you few opportunities to familiarize yourself with the process. You are swamped by mountains of paperwork to sign, a strange new vocabulary to deal with, and numerous fast-talking sales people – from real estate agents to mortgage brokers – who smile, point and tell you where to sign.

It’s an exciting time, but it’s all too easy to lose track of what you’re paying for and how much everything costs. Aside from the mortgage, there are numerous charges lumped into ‘closing costs’. Let’s look at four home loan fees to be on the lookout for; this may save you a few hundred dollars.

What are Closing Costs?

Closing costs are the several dozen potential expenses associated with purchasing and financing real estate. They are categorized as “recurring” and “nonrecurring.”

Recurring costs:

Recurring costs not only get paid at closing, but also on a monthly basis thereafter, and include real estate taxes, homeowners insurance, and, if you’re putting less than 20% down, private mortgage insurance (PMI). These expenses need to be paid in advance at the time of purchase, so put them in an account to cover next year’s obligations.

Nonrecurring costs:

Nonrecurring costs are also paid at closing. These include:

  • Application fee
  • Loan fees such as appraisal, credit report, and underwriting fees
  • Any lender-required inspections
  • Broker’s service fee
  • Federal Housing Administration (FHA) fees
  • Veteran’s Administration (VA) fees
  • Title charges
  • Land survey

Most Common Fees

The four most common home loan fees are:

  • Application fees
  • Appraisal fee
  • Private Mortgage Insurance
  • Prepaid Interest

How much should they cost?

The Federal Reserve Board provides some general guidelines for how much these fees should cost:

  • Application fees range from $75 – $300 (including the cost of a credit report for each applicant)
  • Appraisal fees range from $300 – $700
  • Private Mortgage Insurance can be up to 1.5% of the loan amount prepaid and between 0.5 – 1% of the entire loan amount annually.
  • Prepaid Interest varies depending on loan amount, interest rate and number of days that must be paid. $300 – $700 is not that uncommon.

How to Save:

  • Try and make a larger down payment to avoid PMI. If you can afford to make a 20% down payment, do so. PMI is hard to cancel, can be expensive, and offers no real benefits.
  • For lower appraisal fees, direct your loan officer to work with local appraisal companies. Local appraisers have a deeper knowledge of the surrounding neighborhood and will likely be more readily available for the home inspection, to speed your appraisal process.
  • Negotiate with the seller to reduce closing costs. They may be willing to pay your application or appraisal fee for a better deal.
  • Look for special deals on lenders websites. You might be able to apply for free or save on the cost of a credit check. Try to apply direct if possible, rather than going through a broker. You can compare deals online and go straight to a lender if there’s a particular deal you want to apply for. Don’t let a pushy salesperson force you into a bad deal.

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Comments

18 Responses to “Guest Post: 4 Home Loan Fees to Be on the Lookout For”

  1. Jonathan on February 28th, 2012 5:14 pm

    Thanks for bringing this information to the attention regular readers and visitors to your blog. There are so many ways that mortgage companies will try and get money out of you and often in the hurry to sign up to a home loan these fee’s can be missed, until it comes to changing your mortgage.

  2. Cours on March 7th, 2012 5:22 pm

    Thanks for the infos,

    I couldn’t find these kind of information in French websites. I was looking for the price range but maybe it’s different from country to country.

  3. Jonathan on March 10th, 2012 7:17 am

    Hey buddy loved reading this post, haven’t heard much from you recently hope you have some new posts out shortly, you write real well.

  4. Veronica on March 15th, 2012 7:03 am

    If someone is offering a deal that’s “too good to miss” – you can be sure that the rates WILL go up.
    All Lenders are in business, they are not Charities, making a profit is part of what they do. That profit comes from YOUR pocket!

  5. Huey Chuin on April 1st, 2012 9:17 am

    Really interesting article you have here. I definitely got some tips how to save money.

  6. ade sulaeman on April 8th, 2012 8:47 pm

    nice blog, very useful information and easy to digest for many audiences

  7. Brian on April 13th, 2012 12:52 pm

    Amen Veronica, always read that fine print. Lenders are worse then car salesmen!

  8. Aryo on April 20th, 2012 5:21 am

    Wow… nice info…
    very very usefull :)
    Thanks for sharing

  9. Deacon on May 31st, 2012 6:28 pm

    I have paid so much in Private Mortgage Insurance that it almost makes me sick. Do whatever you can to save up a 20% down payment to avoid PMI.

  10. Home Loans on June 27th, 2012 6:55 am

    This is one of the best guidance according to me. You don’t have to go anywhere else because the home loans information on this page will surely help you

  11. Daniel Larsen on July 5th, 2012 2:32 pm

    Thanks for the great post. It’s so important for people to consider these costs when buying a house and even before they make the decision to buy. Saving as much money for a down payment as possible in hopes of avoiding PMI is essential, and putting down 20% or more goes further towards saving money on interest.

  12. Dan Bryant on August 1st, 2012 9:52 am

    Before buying real estate, read up what you can and find out how and where you can save money. I know I would.

  13. Derek @ Freeat33 on November 8th, 2012 8:28 pm

    Fees, fees, fees.
    It’s 25% down payment to avoid the CMHC in Canada. That is the agency that insures bank loans. It costs the borrower around a 2% one time fee to get the insurance, but is waived if you pay 25% down.

  14. mortgage 94000 on November 27th, 2012 8:49 pm

    І ԁon’t even know the way I stopped up here, but I thought this post was good. I do not recognise who you might be however certainly you are going to a famous blogger in the event you aren’t already.
    Cheers!

  15. David from gethomeloans.co.za on January 16th, 2013 3:34 am

    Purchasing a home is certainly a huge financial commitment. Make sure you can meet the obligations. And don’t try to keep up with the Jones’…it’s a debt trap.

  16. WILD about Finance on February 27th, 2013 9:46 am

    Massively helpful article! Just goes to show how many fees are applied, its ridiculous really.

  17. Ketan Gaikwad on April 26th, 2013 5:40 am

    Wow! Nice share…One must always look out for homeloan fees.

  18. Home Insurance for Cheap on May 2nd, 2013 5:27 am

    Now a days its very difficult to buy home in the metro city area because its very expenses and a middle class family man cant afford to high price home in metro cities. so i would like to thanks to writer who made a very informative article.

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