Hidden Fees in Financing a Home
Closing costs can be eye-opening to a first time home buyer or a home buyer who has not closed a real estate transaction in a while. It is important to anticipate the fees to financially prepare for the closing and avoid any unnecessary surprises.
Points are upfront charges that you pay to reduce your loan rate. They are a part of the cost of credit along with the interest rate. They are also tax-deductible!
Per diem (Latin for "by the day") interest is interest accrued from the closing date to the first day of the following month. This charge depends on what day of the month the loan closed. This is your first mortgage payment, made at closing.
Legitimate fees are fees paid to third-party vendors for loan services. They include such fees as:
- Title Insurance
- Attorney settlement fee
- Appraisal fee
- Courier fee
- Credit report fee
- Notary fee
- Recording fees
Even these legitimate fees may be inflated. For example, a lender may charge $100 for a credit check that really only costs $25. Do not hesitate to ask if some of these fees can be lowered.
Hidden fees - upfront charges made by a lender. These hidden or "junk" fees are expressed in dollars; they are charges itemized as closing costs and they may give the home buyer an opportunity to negotiate.
Beware of Hidden Fees When Financing a Home
There are a wide variety of fees that a lender may add to your costs for processing your loan. Such fees to be aware of include:
- Application fees
- Underwriting fees
- Processing fees
- Warehouse fees
- Administration fees
- Amortization fees
- Affiliate consulting fees
- Bank/lenders inspection fees
- Endorsement fees
- Express mail fees
- Document preparation fees
- Origination fees
- Miscellaneous fees (anything else they want to add)
Lenders are required to provide in writing a “good faith estimate” within 3 days of receiving a loan application. You may have time to negotiate or eliminate fees before closing. Once you approve the terms of the loan, be sure you have them in writing and take that with you to the closing, where you should carefully review the charges before signing off. Review them with your MABA buyer agent to evaluate the opportunity to lower your costs whenever possible.