Are Mortgage Origination Fees Estimated

by June S. in Johnstown, CO and by LMK in Shiloh, IL

Ask Kate if loan origination fees are estimates and how much is too much in discount points: June is worried about her Good Faith Estimate form. On one hand, her loan officer claims the origination fee will never change. Yet he checked that it is only an estimate. So which is it? LMK was just approved for refinancing their mortgage and is wondering if they got a good deal. Paying a significant amount in discount points is a concern to me.


Why Is Loan Origination Fee on Mortgage Application an Estimate?

By June S. in Johnstown, CO

Hi Kate,

We are in the process of working with a bank on a house under contract. The loan officer said we would pay a 1/2 point for origination fee and a $595 underwriter fee.

That totals $1595. But, on the loan application, the loan origination fee ($1000) and the underwriter's fee ($595) has a check mark next to it that means it is an 'estimate.'

We are worried that if we sign this, at the final closing, the bank can raise this amount. The loan officer told us he cannot make a change to the document as it is law (in Colorado). But, we feel nervous to sign because we worry we will have a surprise 'increase' on the final HUD. LMK, a homeowner on Sholoh, Illinois asks me if their refinancing offer is a good deal.

The Loan officer told me he will not allow this.

Can I trust him, or should we refuse to sign the application form (which by our signature confirms we are in agreement to all that is written on it).

Also, is it fair for him to charge a $595 underwriter's fee? He removed the $600 processing fee. Seems most banks charge both these days.

Thanks so,
Yours,
June

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Why Is Our Loan Origination Fee on Mortgage Application an Estimate?

Hi June,

There is no good reason on the face of the earth that a loan origination fee should be an estimate.

But all you have to do is check out some Ask Kate questions to know that bait-and-switch is alive and doing well!

That being said, you should expect your Good Faith Estimate to be a realistic snapshot of what you are being charged.

Should I Trust My Loan Officer?

So should you trust your loan officer? Wow, THAT I can't tell you! But I will advise you to trust your gut instinct.

Loyalty is important in business relationships. I believe in loyalty! But in the end, you are the one who will be making the house payments for the next 30 years. So take care of yourself, your home, and your mortgage. Be wise and be selective.

Should I Pay Junk Fees?

The loan origination fee is your lender's charge for getting the loan for you. In other words, this fee is the grand total of lender charges.

You cannot be charged junk fees on top of the loan origination fee, no matter how official they sound. And you shouldn't feel obligated to pay junk fees, regardless of which lenders in town are trying to charge them!

I want you to study my break down of the Good Faith Estimate form until you have it memorized like the back of your hand.

I think at that point, all of your questions will be fully answered about wishy-washy Good Faith Estimates, the legalities of junk fees, and verbal vs written explanations! Otherwise leave me a comment here with further questions (See end of page for link to commenting.)

Best wishes,

Ask Kate

Is Our Mortgage Refinancing Offer a Good Deal?

By LMK in Shiloh, Illinois

Hi Kate:

We were just approved for refinancing our house, and were wondering if we got a good deal. We have a fixed rate of 3.875% for 30 years, loan amount $164,300.00.

Our total estimated settlement charges are $10,473, which includes an escrow account of about $400, discount points of $7,097, and roughly $2,000.00 for taxes, insurance and interest.

Our current mortgage is 6% for 30 years. We would like to keep our loan at 30 years instead of 15 years, which would give us the opportunity to pay it off early with the savings we would receive through refinancing.

Also with uncertainty of the economy, if something were to happen we would be able to cut back on that money without worrying about having to make a higher house payment.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Is Our Mortgage Refinancing Offer a Good Deal?

Hi LMK,

I like your plan of taking a 30 year fixed rate vs a 15 year fixed rate as a safety net. As long as the loan terms do not impose a prepayment penalty, you can always pay the mortgage off faster. But should you lose a job or suffer a hardship, you have a reliable, affordable payment to fall back on.

See Extra Mortgage Payments vs Lump Sum Payments for more thoughts on this matter.

I wish I could tell you if this specific offer is a good deal but I'd just be spouting nonsense. Interest rates vary across the nation as a whole. In particular, they are affected by individual qualification criteria.

Am I Paying Too Much In Discount Points?

But I will say you are spending quite a bit on discount points. This practice can come back to bite you if the mortgage is refinanced before reaching the breakeven point.

Go to Mortgage Refi Tips and Answers to learn how to determine if you are making the bank rich or benefiting from buying down your interest rate.

Best wishes,

Ask Kate

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