Excess closing fees - how to cut expenses

Published On: January 9, 2012


 

In an interesting article in the Sunday Chicago Tribune, "Taking Out The Trash, Cut Your Closing Costs By Getting Rid Of Junk Fees", Lew Sichelman outlined some fees that seem to get tacked on to closing expenses that may not be appropriate in all cases and how you can avoid unnecessary charges.

  • Application fee - if you are approved for a loan, you shouldn't have to pay if you have already paid an origination fee
  • Document review fee - unless lenders expect fraud, they rarely look over documents when they get a file back, if they do look, the expense is rarely justified by the cost
  • Underwriting fee - lenders are in the business of making money from lending money, this charge should be covered by the origination fee
  • Processing fee - costs here should also be already covered by the origination fee
  • Inspection fee - covers inspections by the lender, was the inspection necessary and was it actually conducted?
  • Courier fees - sometimes couriers or overnight delivery services are engaged to move documents to where they need to go, but was it necessary and was the courier actually employed?
  • Tax Service fee - supposedly the cost of paying the property taxes on the borrowers behalf.  Since taxes are usually paid by wire transfer, the fee is usually excessive
  • Mortgage Guarantee fee - if the mortgage is sold to Fannie Mae or Freddie Mac lenders are charged for the government guaranteeing the principle and interest but if lenders hold the mortgage themselves or sell to a non-governmental entitiy, this fee should not be charged.

Some charges are legitimate and usual expenses in extending a mortgage loan.

  • Origination fee - the fee, as a percentage of the loan, to cover the lender's work in evaluating and preparing your loan.
  • Transfer taxes - taxes charged by local and state gov't. for selling real estate
  • Appraisal fee - an appraiser will be hired to make sure the property is worth the mortgage amount, the buyer should get a copy of the appraiser's report

Check the balance statement prior to closing and make sure you ask your lender what and why they are charging what they do to grant you the mortgage!