If you buy new windows, you'll not only pay for the windows, you will also pay an installation fee. When you purchase a car, you pay tax, title, assumption fee, etc. Just about every major purchase comes with extra costs or fees, and home loans are no different. Most people think they don't have to pay costs on a loan, because they are paying interest on the loan (they figure this is their fee ? a premium on the money). A mortgage, however, does not come free.
While some are mandatory, others are not. Follow these guidelines, and you'll never pay too much for your purchase mortgage or refinance loan. The origination fee -- The fee that bothers people the most is the origination fee, or what some mortgage people call a broker fee. This is often confused with points, but should not be. Points are something completely different. The origination or broker fee is what you pay the loan officer to originate or create and complete your home loan, whether it's a purchase or a refinance. All mortgage people charge them, whether they work for a mortgage brokerage or for a bank.
Remember, if you're told there is not a broker or origination fee, chances are you're paying a higher interest rate, and this is how they're making this fee. The origination fee is the primary way mortgage brokers make money. The company gets the entire fee, and your broker or loan officer gets a percentage of that fee ? somewhere between 30 and 65 percent.
So, if your mortgage broker charges you two percent on a $100,000 loan, this is $2,000 for his company or bank and up to $1,300 for him. You may think this is an outrageous amount of money, especially considering that this is just one of the costs you have to pay, in order to complete you loan. It might be, and then again, it might not. It depends on what type of loan you get, how much work is involved in closing it, and the quality of the service you get. Here are a few guidelines on what you should be willing to pay in origination or broker fees.
Bad credit's effect -- If you are a sub prime borrower, or someone with credit problems, expect to pay more ? up to $3,000 or $4,000. Remember, sub prime, or non-conforming, borrowers have some type of baggage that makes them difficult to get approved, which is a huge part of the mortgage professional's job. They may, for example, have a recent bankruptcy or foreclosure on their record, or a civil or criminal judgement, tax liens on the property, or very little equity in their home. These are problems that good mortgage professionals can get around, but it takes a lot of time and effort.
I once helped an elderly gentleman on a fixed income refinance his home, and he had 14 liens against his home, all of which had to be satisfied, before his mortgage could be paid off, and he could get a new loan. I had three weeks, and probably 25 hours of time, just clearing these liens. One of them was a defaulted car loan on a car he didn't even have. He owed $3,000, hadn't made a payment in three years, and the bank was still after him. I had to negotiate with the collection agent from that bank, and get them to take $1,800 to satisfy the loan, which I would work into his new mortgage. After many telephone conversations and some very hard selling, they agreed, and I wound up getting it done.
Now, I would have normally charged a minimum of $2,500 (over five percent of the loan amount, in this case) for this type of work, but there was not enough equity in the house to get that much origination in the loan. I actually did it for less than $1,000 ($500 of which was mine), just because I wanted to help this man, who needed the cash he was going to get from the new loan to put a new roof on his dilapidated house. This is just one example of when it's acceptable to pay more in origination fee, even though this man didn't have to do so.
Conversely, let's assume you're refinancing your home in a perfect scenario. You have perfect credit, lots of equity in your home, plenty of cash reserves, and the paperwork is very easy. The loan officer says he can complete your loan in two weeks, most of which will be consumed by the work of other people, such as title agents and an appraiser. This origination should not be much more than one percent of the loan amount and even smaller, if the loan amount is over $150,000. This is a loan that mortgage people refer to as "A Paper." It is very easy to close, and takes very little work, so the loan officer can make his money on volume, by doing lots of these types of loans. I always charged $1,500 or less for an A Paper loan.
So, begin learning your closing costs by finding out what the origination fee is (remember, most of the time it's negotiable). One to two percent of the loan amount is acceptable, unless extraordinary circumstances exist.
Mark Barnes is the author of the new novel, The League, the first work of fiction, based on fantasy football. He is also an investment real estate and home loan finance expert. Learn more about his suspense thriller at http://www.sportsnovels.com Get his free mortgage finance course at http://www.winningthemortgagegame.com
Dealing with mortgage companies online can enable you to get... Read More
Searching for a mortgage can sometimes be a hassle. Where... Read More
In other words, the benefit of the loan must outlast... Read More
Mortgages have assumed a number of characters from the time... Read More
If you're thinking about applying for a new mortgage or... Read More
So you have a mortgage, and you need to refinance... Read More
Before I go further, let me ask a question- if... Read More
A Self-Certification mortgage is a mortgage designed for people who... Read More
Home equity loans and lines of credit are useful tools... Read More
A few years ago, a loan officer who worked for... Read More
Like a big brother keeping notes of the erring behaviour... Read More
Buying and financing a home today can be overwhelming. Here... Read More
The search for quick homeowner loans can seem futile at... Read More
One of the most important steps in the home buying... Read More
Shakespeare once said about human nature 'with nothing shall be... Read More
A mortgage is borrowing money using property as a security,... Read More
Mortgage Debt Elimination shows that most home loan debts will... Read More
With escrow accounts the money for your home insurance and... Read More
Outlined below is a useful guide to flexible mortgages. Flexible... Read More
For the first time since May 1996 reports have indicated... Read More
A fixed-rate mortgage is a mortgage on which the interest... Read More
If you owe 40 percent or less of your original... Read More
The home equity loan has become quite popular in the... Read More
If you as an investor understand the process, you will... Read More
Borrowing against the value of your home using a revolving... Read More
There are many benefits in choosing a remortgage, some of... Read More
This is a great time to Refinance Your Home or... Read More
You can maximize your savings by shopping for a lender... Read More
How To Release Equity Locked Up In Your Home For... Read More
Mortgage would have never happened, had mortgages been a no... Read More
There are several reasons why you might be in the... Read More
Private lenders, banks, and mortgage companies are all setting up... Read More
"We will help every Council Tenant to become Home Owners"... Read More
Think About the Long Term. Estimate how long you expect... Read More
Online homeowner loans have been growing in popularity in recent... Read More
Refinancing lenders seems to hold all the cards. They have... Read More
Buying a home with bad credit doesn't have to stop... Read More
One of the things that bothers me about the mortgage... Read More
So, you've found the perfect home. You've already decided where... Read More
When going to refinance or get a mortgage loan quote,... Read More
In the US today more households have mortgages than ever... Read More
Having just settled in life, you are finding the rentals... Read More
A home equity loan is a loan that is guaranteed... Read More
Looking for the best homeowner loans can be stressful, especially... Read More
Owing to the popularity of home equity loans, there are... Read More
You've finally found that dream home that you have always... Read More
There are many reasons to use the internet to take... Read More
1. Save on your income tax.Yes, something good can come... Read More
A home equity loan allows you to borrow against the... Read More
Presently council tenants are able to purchase their rented property... Read More
A few years ago, many of us would have had... Read More
There are several reasons that might make someone consider refinancing... Read More
Private mortgage insurance, or PMI, is the safety net of... Read More
When looking for a mortgage to meet your needs, consider... Read More
As the term implies, with a fixed rate mortgage the... Read More
Are you wondering if you can get approved for a... Read More
Have your home's appreciation grow twice as fast.For Seniors over... Read More
You've found a house that is perfect for you. It... Read More
An adjustable rate loan, most simply stated, means that your... Read More
A capped mortgage is a variable rate mortgage with a... Read More
A mortgage is a loan, usually from a bank, finance... Read More
Seldom in ones life do we get a chance to... Read More
Finding a good lender to help you with refinancing your... Read More
So you've finally decided you've had enough of paying rent... Read More
When buying a home, you need to take a home... Read More
Applying for a home loan may not be the most... Read More
Mortgage Refinance |