Mortgage Fees You Can Avoid

Plugging numbers into a mortgage calculator is easy—deciphering the results is not. Consider the following fees during your search for the right mortgage broker. 

Origination fees:

This is the originator’s commission for securing the loan. Ask what their origination fees involve. These are listed in block one on your Good Faith Estimate and line 801 of your HUD-1 settlement statement.

Administration fees:

There is no standard definition of what these fees are. Sometimes administration fees are bundled together with origination fees so ask your lender if this is the case. Since this fee varies from lender to lender, it is commonly overpriced.

Application fees:

This is pure profit for the lender. A credit report costs about $10. Do not pay more unless you are provided with a bill detailing greater expenses.

Discount points:

One point is equal to one percent of the loan. For example, one point of a $100,000 loan is $1,000. A discount point is something you can pay the lender to decrease the loan interest rate. 

Unless you plan on keeping the loan for a long time, paying discount points may not be worth it. Consider how long it will take for the upfront cost of the discount points to equal the savings you get on your monthly payment. This is referred to as the break-even point. If the break-even point is near the end of your loan's life, then the savings are minimal. 

If you choose to pay discount points, check to see if you can claim them as tax deductible.

Appraisal fee:

This is paid to verify that the property is worth as much as the selling price. If home prices are on the rise, and you bought your home recently, this is unnecessary.

Lastly, confirm that the fees on the good faith estimate are the same as those on your HUD-1. The GFE lists the cost estimates, while the HUD-1 includes the finalized closing costs.

Below is a chart for reference from the Federal Reserve Board.

Carolina Palmer

Carolina Palmer is the Senior Editor at Lender411. She graduated from Concordia University Irvine with a Bachelor's Degree in Communication Studies and Marketing. She has multiple years of experience in marketing and writing, and has previously worked with 3D Systems and Microsoft.