Common Lending and Mortgage Fees in the Washington, D.C. Area
July 17, 2016
July 17, 2016
Individual home buyers don’t normally pay the entire purchase price in cash. Instead, most buyers apply for a loan (commonly referred to as a “mortgage,” even though many purchase money loans now take the form of a promissory note and deed of trust).
The banks and mortgage companies that make these loans will often charge the borrower (the home buyer) a variety of fees. Some of these fees can be added to the total amount of the borrower’s loan (requiring no out-of pocket cash) while others must be paid by the borrower directly, either during the application process or before the loan is funded.
Here are some common lending fees home buyers may encounter in the Washington, D.C. area:
- Application Fees. As the name suggests, buyers pay this fee at the time they first apply for a purchase money loan—and it’s usually not refundable, whether or not a loan is granted (or accepted by the buyer).
- Origination Fees.These fees are paid to the broker or mortgage company that acts as intermediary between the borrower and the lender who provides the money for the loan. Origination fees customarily average 1-3% of the loan amount.
- Document Preparation Fees. As the name suggests, these fees (which normally range from $50-$200) pay for preparation of the loan documents.
- Appraisal Fees. Before making a loan, lenders require an official appraisal of the home the borrower wants to buy, to ensure the house is worth the purchase price (or, in some cases, the amount of the loan). Appraisal fees run $200-$600, depending on the lender, appraiser, and property being appraised.
- Underwriting Fees.Like origination fees, underwriting fees average 1-3% of the total loan amount. These fees pay the lender for a variety of services, including a variety of loan research, underwriting, and funding services.
- Flood, Survey, & Inspection Fees. These fees pay for flood reports, property surveys, and similar reports and inspectionsthe lender uses to evaluate the property before making a purchase money loan. Fees in this category range from a few hundred dollars to almost a thousand, depending on the area, type of property, and lender requirements.
- Credit Report Fees.Lenders will want to view the borrowers’ credit report before agreeing to grant a loan; the credit report (which normally costs around $50) will also impact the terms a lender is willing to offer.
- Points are fees (typically valued at 1% of the loan amount per “point”). Buyers often pay optional “points” to reduce the interest rate of a home purchase loan.
Additional fees may also apply, depending on your lender, the amount of the loan, and whether tax and mortgage insurance escrows are required as part of the lending terms. Some unique loans, like those obtained through the VA (Veterans’ Administration) and other special housing programs, may have fewer (or different) borrower fees.
Some lending fees are negotiable, and your particular circumstances may vary based on a variety of factors, so always consult a knowledgeable broker or real estate attorney before agreeing to the terms of any mortgage loan.