Mortgage Loan Fees You Need To Know

Let’s cut to the chase obtaining a mortgage to buy a home or refinance one you already own is not cheap. There’s no two ways about it. Encumbering property is going to cost some bucks. Knowing the fees lenders charge including both upfront and later on in the transaction can help ensure you’re getting a fair and competitive loan offer.

Upfront Fees

These are the things that you need to pay for upfront before loan transaction has actually consummated. This will vary from lender, bank or loan broker, but there are three main fees that lending companies may charge before a loan has closed.

Appraisal Fee

This fee is probably the most common upfront cost across the board whether you’re working with a mortgage lender, broker, bank or credit union. Nearly every single loan product these days other than the Harp 2 to requires an appraisal, even Harp 2 may require an appraisal ass well. An appraisal will determine the value of the property, and more importantly the loan to value which is a significant driver of risk i.e. cost that is unknown without an valuation in hand. Additionally, the lender requires the appraisal to be paid upfront because if the loan does not move forward, the appraiser still needs to be compensated and the lender otherwise is on the hook. Expect an appraisal for a primary home transaction to be approximately $400-$500. Investment property transactions typically costs an extra $200 – $300 because the appraiser has to create an additional operating income statement and rental market analysis for the property. This fee is called POC represents ‘paid outside of closing’ which reflects an accounting credit when you receive mortgage loan disclosures-identifying fee is already paid for.

 Lock Fee

When a lender locks your mortgage interest rate, they effectively are setting aside several hundred thousand dollars or whatever your loan amount is at a specific interest rate and cost customized to you. If interest rates rise, lender loses money. For example if you are locked at 3.875 on 30 year fixed and rates rise to 4.125, your loan is not as attractive to the end investor as 4.125% is lending to someone else. A lock fee helps support the lender’s profitability.

Application Fee 

By collecting a fee up front, the mortgage company can then take this application fee and pay the appraiser. It’s quite common that some mortgage providers might call an application fee and appraisal fee the same thing ,with the same exact meaning that the appraiser needs to get paid and shouldn’t have to wait until close of escrow for services rendered.

Mortgage Loan Fees Due At Closing 

These can be paid for at close whether financed in the loan amount or paid for in cash at escrow closing.

Origination Fee this is margin the lender earns by taking a loan application, arranging the loan, procuring funds and subsequently closing. This fee varies across the board, lender fees range north of $1,000 typically. Also included in this fee  is any processing fee, underwriting fee or lender fee. If working with a mortgage broker, the origination fee, is also any percentage of compensation you agree to pay to that mortgage professional in arranging financing for you.

Discount Fee

Whichever interest rate you choose on whatever day you lock-in rate may contain a cost/fee associated with that rate which your loan disclosures will reflect. Traditionally, a discount fee is upfront overhead you choose to pay in order to generate a lower rate of interest subsequently, for the benefit of a lower monthly payment.If there is a certain rate of interest you have in mind you need to have in order to justify your mortgage transaction understand your credit score, loan program, occupancy, and down payment/equity and loan size could all affect your rate and any discount fee/points. Discount Fees can be anywhere from as little as one dollar all the way to several thousand dollars depending on the rate and scenario you have set up with your mortgage provider. Additionally, any discount fees can also be a negative.

Lender Credit- Lets say based on the day you choose to lock in your interest rate there is no cost with that particular interest rate, but actually a credit amount. This credit amount is a direct credit in real dollars toward your closing costs reducing your fees when refinancing or reducing your cash to close when purchasing a home.

Mortgage tip: a lender credit based on whatever interest rate you choose means you are going to be paying slightly more than a market rate in exchange for that lender credit based on your financial picture details identified above. In other words if you are willing to pay discount points or have no discount points associated with your mortgage transaction at say o points, your interest rate and associated monthly mortgage payment would also be lower .

A Word On Loan Disclosures

*Loan disclosures showing total closing figures no matter what your loan purposes is an estimate.*

When Buying A Home: one of the main pieces of criteria a mortgage provider needs is a property address. If you are pre-approved for a mortgage, but have yet to ink a purchase contract, your lender should have provided you a preapproval letter, nothing more is required. A good mortgage loan officer will also provide a detailed comprehensive spreadsheet of the total numbers in addition to providing the preapproval letter. Only when you have signed by all parties purchase contract to to purchase a home with an identified property is the lender required to send you loan disclosures within three days of ‘creating an application.’

When Refinancing: an address, as well as, job, income, and loan amount numbers can be estimated at this time and loan disclosures go out within the three-day window. A word to the wise ….initial loan disclosures during a proposed refinance are subject to change as is the interest rate and any associated discount costs based on the appraised value. This is critically important to understand and remember-loan fees can when the value of the house is made known.

We when over the fees the lender charges as illustration points in this article as there is more variance in mortgage loan fees and rates then there is working with title and escrow companies. Title and escrow companies should also be very closely observed and examined when determining which which housing costs type is more suitable to your situation.

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RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

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