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Lenders, why the extra fees?

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CNN Money recently wrote that closing costs in many states have increased an average of 20% from the previous year. Despite this sharp increase, buyers are still taking advantage of great rates on mortgages. But home buyers should beware- sometimes, the same lenders that are offering great interest rates have also increased their closing costs to make up the difference. Depending on how informed the buyer is, a lot of these extra fees can come as a surprise, or end up being financed into your home loan. We would venture to say that the reason these mortgage lenders are able to offer such low interest rates is because they charge more closing fees to their customers, which more than offsets the deceptively low interest rate.

Advertising an ultra low mortgage rate (or “teaser rate” as it’s often referred), can be a great hook to catch the attention of a potential home buyer. But, when it comes time to close on your home loan, and thousands of dollars of junk fees are financed into your home, that slightly below-market interest rate may come at a pretty price and could dramatically reduce your home equity as well as your personal savings. Bankrate.com says it best in a great article on closing costs: “Comparing one mortgage to another isn’t as easy as just comparing rates. Borrowers need to shop all three major components of a loan’s price, rates, points AND fees, before selecting lenders.”

Just what are closing costs? Typically, at closing, a buyer will be asked to pay anywhere from 3%-5% of the home’s sales price in closing costs, according to an article by Zillow. These closing costs are the sum total of fees incurred by the lender to process the loan, such as the appraisal fee, loan origination fee, title insurance fee, and recording fee, just to name a few. According to Zillow, ‘the final costs to you may be quite different from your lender’s original good faith estimate,’- meaning, some of these fees could come as a surprise if you don’t stay informed.

These are just a few questions to keep in mind for the informed home buyer. At James B. Nutter & Company, our non-commissioned loan officers can get you pre-approved for your next home loan at no cost, and provide you with detailed information as to what you should expect out of your home loan. As a practice, and in adherence to our founding principles of good business ethics, we don’t charge junk fees!

James B. Nutter & Company is a licensed mortgage banking firm in 50 states that has been making FHA, VA, and Conventional Loans for over 60 years. Call (800) 217-7334 or send an email to loans@nutterhomeloans.com to speak with one of their licensed, non-commissioned loan officers.

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