We want to educate everyone on the potential fees you may be charged during the mortgage process, especially at the end with Closing Costs.
What are Closing Costs? Closing costs include all fees paid by borrowers or sellers during the closing of a mortgage loan. They usually include the following five types of fees:
1. Appraisal fee
Mortgage lenders use an appraisal by a certified third-party appraiser to determine if the home you wish to buy is worth the amount you want to borrow. This is typically a one-time, upfront fee that usually amounts to a few hundred dollars.
“See if a lender can get a “property inspection waiver” for your specific loan. There are options some mortgage lenders have to help secure appraisal waivers in situations where you might think an appraisal would be required. Not only does this cost less than an appraisal, but it prevents the risk of an appraisal coming in lower than you need, while also speeding up the loan process.”
2. Loan-Related Fees
Assumption fee: If you take over the seller’s mortgage, you may have to pay a fee based on the balance.
Attorney fees: Some states might be referred to as “Attorney States.” This means that the attorney not only is required to be present at closing but is also required to prepare some of the closing documents and review the other closing documents they did not prepare. The work completed on the consumers closing may be included in their fees.
Origination fee: Many lenders collect this up front to pay the appraiser, arrange your mortgage loan, etc. There are times this could be waived so be sure to ask your mortgage lender.
Discount fees or points: An upfront fee paid to reduce your loan’s interest rate. The cost of one point equals one percent of the loan amount. This could be worthwhile if you plan to stay in the home long term.
Prepaid interest: Many lenders ask you to pay the interest you owe between the date of settlement and the first monthly payment due date.
Broker fee: Some mortgage brokers may charge a percentage of the loan amount as fees.
“There are different types of “lender fees” that could be applied to your total closing amount, so it is important to take the time to understand all of the fees associated with purchasing your new home. Depending on your situation it may not make sense to pick the lowest rate available so you should really take a step back and evaluate how long you really see yourself staying in this same house and mortgage to decide which combination of rates/fees works for you. There is no “one-size” fits all mortgage rate so you may want a lender who is able to explain the different options and breakeven points to find a great solution for your situation.”
3. Mortgage Insurance Fees
Typically, buyers who pay less than 20 percent as a down payment must purchase private mortgage insurance (PMI). This protects lenders if borrowers default payment.
If your loan is insured by the Federal Housing Administration (FHA), you have to pay mortgage insurance premiums. If it is guaranteed by the Department of Veterans Affairs (DVA) or the U.S. Department of Agriculture (USDA), you have to pay guarantee fees.
“Ask a lender if they have “Lender Paid PMI” options because in some situations it makes more sense paying a slightly higher interest rate to avoid the monthly PMI costs especially if your goals are more short-term in nature.”
4. Taxes, Annual Fees and Insurance
In certain situations, you may have to pay two months’ worth of city and county property taxes and a tax for title transfer at closing.
Lenders also typically require that you buy homeowner’s insurance to cover the house and its contents.
Another fee to be aware of is there might be an annual fee to your condo or homeowners’ association.
“Don’t underestimate the impact of HOA/condo dues. A $200 HOA fee per month is equivalent to about $50,000 in buying power if you’re comparing to a house with no HOA dues. Also be aware of possible HOA setup/transfer fees if you are buying a new home. These one-time fees often can be charged to the buyer in addition to the normal quarterly/annual HOA dues.”
What Makes Wyndham Different?
Unlike some mortgage lenders, in most states Wyndham Capital offers a fully digital, streamlined approach that could save you money.
Oh yeah, we use automation. Our advanced tech cuts out waste and extra costs in the process.
5. Title Fees
Title insurance protects lenders in case there is an error in the title search and an ownership claim after the property is sold. Coverage lasts until the loan is paid off. Buyers also can purchase title insurance to protect themselves from similar problems. Coverage lasts as long as you or your heirs own it.
A title search ensures that the seller owns the property and there are no outstanding claims or liens against it. The fees for this may be included in the title insurance cost.
Apart from this, you may need to pay recording fees to make your purchase official.
There are still plenty of other fees lenders may charge you. Certain fees can be avoided (like Credit Report, Flood Certification, Tax Service, Underwriting, etc.) depending on your loan, and if you work with a lender like Wyndham Capital.