(PRWeb) February 1, 2007 -- Before a borrower begins a search for a new mortgage quote, there are some general fees and terms that borrowers need to be familiar with in order to avoid inflated fees and being taken advantage of by their mortgage broker.
Fees that are often overinflated:
Processing fee -
The mortgage broker already gets paid a fee from the lender and then the borrower is also charged a fee for "processing" the loan. The processing fee usually cannot be avoided, but, beware of brokers who charge more than $1000. More than $1000 for a processing fee is usually too much.
Mortgage Origination Fee -
The origination fee is basically what the broker charges for processing the loan. It is normally between 1-2% of the loan amount. That amount is a common fee for a broker's services, but unless you have a very complicated loan, paying 2% is too much.
"Junk" Fees:
Fax Fee -
Mortgage Brokers often add a "fax fee" to the settlement sheet. This charge is usually between $20-40, but rarely do brokers explain it. These days, it's difficult to conceive of how a professional brokerage can accumulate such a significant cost for simply faxing paperwork about you and your loan application. Talk to your mortgage broker to see if this fee can be reduced for you.
Warehouse Fee -
This is a fee that numerous brokers and lenders will add to the settlement sheet but fail to explain in any detail. Indeed, getting a clear description is difficult since this is one of the most blatant junk fees you can imagine. During the course of your loan approval and applicatoin process, where is there a warehouse involved? Since everything is electronic nowadays, there isn't a gigantic warehouse somewhere, where a loan broker will have to search for a box with your name on it. If you find this fee added to your mortgage paperwork, ask your broker to explain in depth to you what this fee is about and then we would suggest asking him to remove it.
See 13 Junk Fees Your Mortgage Broker Might Be Adding To Your Loan
Terms that every borrower should be familiar with:
Equity grabbing - An unethical type of predatory lending where the loan provider purposely attempts to put the borrower into a home loan that will result in a relatively quick default, so that way the lender can "grab" the borrower's equity.
Good faith estimate - A standard form from a lender that details any and all anticipated settlement charges that the borrower should expect to pay at closing. The lender is required to provide this document within three business days of their receipt of a loan application. This is one of the most important documents in the loan process. This is the borrowers chance to go over all anticipated fees and terms in great detail.
Negative amortization - An increase in the outstanding loan balance, resulting from multiple monthly payments that are less than the interest due. This type of loan can be a real killer if the borrower doesn't plan to refinance the loan or sell the home quickly after closing.
Pre-approval - A commitment by a lender to give a loan to a borrower, without the borrower having chosen a property yet. The pre-approval is designed to make it easier for the borrower to shop for a house. However, a pre-approval does not in any way guarantee that the borrower will be able to obtain the mortgage loan. It is an educated estimate.
Rescission - The right of the borrower to completely cancel the entire mortgage loan, withou fear of reprisal of repimanding. The buyer is required to submit such a request in writing within three days of the loan closing.
Do You Know What These 56 Mortgage Terms Mean?
Those borrowers who have bad credit or are seeking a new mortgage after bankruptcy are at the highest risk for being taken advantage of by subprime mortgage brokers with high fees and unfavorable loan terms.
Whether a borrower is seeking a new purchase loan, refinance, home equity, second or third mortgage loan, mortgage brokers will continue to overinflate charges and add unnecessary fees to the mortgage loan process. It will be the educated borrowers who will be able to protect themselves financially from being taken advantage of.
Refinancing? Getting a Home Equity Loan? See 50 Things You Must Know Before Your Refinance or Get a Home Equity Loan
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