All loans have interest rates and fees. The amount of fees associated with your loans depends on the type of loans you take out. Major considerations are based upon your income, credit history and credit score. If your credit score is below 540, the chances of receiving loans with good interest rates or monthly payments are slim. For those interested in purchasing or refinancing a home, there are many fees that could be associated with your loans.
Types of Fees
Application fees, lender fees, origination fees, closing fees, commitment fees, notary fees, copying fees, flood certification fees, appraisal fees , title review fees, survey fees, line of credit fees and state and local taxes are all expenses to think about when you agree to mortgage loans. Many of these fees are what companies call “third party fees.” Not all of them are necessary, but many are, and they a major part of the loan process. An explanation of many of these fees will be detailed throughout this article.
Yes. Loans do have third party fees. The title insurance, appraisal, lender, closing, notary, credit report, survey, tax service, flood certification, and courier/mailing fees are all third party fees. They are the expenses collected to pay the individuals that actually perform the service (i.e. the notary is paid the notary fee, an attorney is paid the title insurance fees, the lenders are paid lenders fees for negotiating special services from party to party, etc.). Lenders sometimes receive courier or mailing fees, as well as flood certification fees.
Origination fees for mortgage loans are charged by lenders to provide credit checks, prepare loan documents and inspect the property. These fees can be included as a part of the lender’s fee. Some lenders will contact appraisers to handle the appraisal fees. The face value of the loan will sometimes include a percentage of the origination fees.
The application fee can add up to as much as $500 towards loans that are $250,000 or more. If you have to take out an additional loan for the same property, this fee should not exceed this amount, but the loan application can vary from state to state. The application fee can be credited toward the closing fee.
Mortgage Loans
There are several types of loans to consider. Conventional fixed-rate, adjustable rate mortgage or ARM, Federal Housing Authority or FHA, no documentation and family loans are a few of the mortgage loans that are available. The types you should apply for depend on the type of home you want to purchase. Single family homes, 2-3 family homes, primary homes, townhouses and condos all qualify for different types of loans.
No documentation loans do not require verification of income, nor do you have to supply assets for down payments or closing costs. There are benefits and stipulations to these loans. The borrower can have a fixed-rate loan with no prepayment penalties. You are also required to put down a minimum of 10 percent. However, if your credit score is below 660, a higher down payment will be required.
Conventional fixed-rate loans are somewhat different. These loans depend on the type of home you are purchasing. You are required to have a credit check and verify sources of income. Down payments can be as low as 5 percent down and as high as 20 percent down. Single family homes require less down than 2-3 family homes. In some cases, no money down is an option. With these loans, there are special circumstances that will allow you to eliminate the need of private insurance and keep a fixed rate throughout the duration of the loan. These are options you should address with the lender, prior to a contract agreement.
Every state is different, but anywhere you go, you can be sure that loan fees are waiting. Before you commit to any loans, be sure to address any unexplained or unfamiliar fees. Not every lender is willing to explain their fees prior to a signed contract agreement. They are also not likely to waive any fees if you don’t know which fees are absolutely necessary. The best way to tackle loans is to become familiar with them.
By Jaime Cannon