The Most Common Mortgage Fees You Need to Pay

Usually, mortgage fees fall under closing costs, and closing costs are fundamentally an umbrella category. The closing costs typically equal 2% to 5% of the sale price of the property and are paid on the day you put your signature on the final loan documents and assume responsibility for the mortgage.

When you financially prepare yourself for the following fees, you can budget effectively to ensure the home-buying process goes smoothly.

A home appraisal fee is one of the first fees you are possibly going to encounter. Lenders need an appraisal to find out whether the property’s value is enough to provide sufficient collateral for the loan. Upon failing to repay the loan, the lender will seize and resell the house. So, verifying the market value of the property reassures the lender that it will be able to recoup all or most of the loan amount.

The average cost for a home inspection can be anywhere between $275 and $400. This fee covers a professional home inspection, which is critical to making sure you are not buying a home with unknown and potentially costly issues. Many lenders demand an inspection to protect their financial interests, but an inspection also serves to protect you and your investment.

If you work directly with a lender, you will have to pay a loan origination fee. It is an upfront charge from your lender to review your application, verify your information, and perform other necessary administrative tasks to process your mortgage loan. Those who work with brokers will have to pay mortgage broker fees for the same purpose. Both fee types typically range from 0.5% to 1% of the loan amount.

Application fees may be included in your loan origination fee. You must read the loan documents carefully and check with the lender if you have a reason to believe you have been double-charged. Application fees may also be charged if you need to apply for private mortgage insurance (PMI), which happens when you pay less than 20% down payment.

The credit report fee typically costs around $35. It is a fee charged by lenders to pull your credit report from at least two credit bureaus. Lenders want to review your credit reports to ascertain whether you are eligible for a mortgage loan and determine the interest rate you will pay on the loan. This fee is usually non-refundable whether your loan application is approved or denied.

The recording fee covers the local government’s charge to confer and record your new property’s deed. Documenting and recording the transaction is crucial as it creates a public record, solidifying your legal ownership of the property.

Also Read:  Can You Sell a House with a Mortgage?

The mortgage broker fees will be the least of your worries if you do not review your credit before applying for a mortgage. Consider acquiring a copy of your credit report before shopping for a mortgage.

Never forget that your credit scores and payment history are critical factors considered by lenders when determining mortgage approval and interest rates. Knowing these factors as early as possible will help you make informed decisions.