13 “Junk Fees” Your Mortgage Broker Might Be Adding To Your Loan
I asked my mortgage advisors, “What are the fees that a broker might charge you that are either inflated or completely bogus?”
Here are the answers:
Processing fee -
Not only does the mortgage broker receive a fee from the lender, but the borrower is also charged a fee for “processing” the loan. This fee usually cannot be avoided, but beware of brokers who charge more than $1000.00, as this is considered very excessive.
Real estate agent’s administrative fee -
Many real estate agencies have started charging a fee, around $200, to both buyer and seller. This is in addition to any real estate commission earned by the agents.
Mortgage Origination Fee -
The origination fee is basically what the broker charges for doing the loan, normally between 1-2% of the loan amount. This is a common fee for a broker’s services, but unless you have a very complicated loan, paying 2% is too high.
Credit Report Fee -
When working with a mortgage broker, be sure that they provide you with a copy of the credit report they pulled on you. Too many times, finance companies will provide brokers access to applicant’s credit report databases for free, however the brokers will still add a charge of between $25-50 to the settlement costs. In that case, the broker is simply making an additional profit. Your charge should not be higher than the actual cost to the lender or broker, if indeed there was a charge to them at all.
Fax Fee -
The broker will very often add a “fax fee” to the settlement sheet. Usually this charge is between $20-40, but rarely do brokers explain it. In today’s age, it’s difficult to conceive how a professional brokerage can accumulate such a significant cost for simply faxing paperwork about you and your loan application.
Warehouse Fee -
This is a fee that numerous brokers and mortgage 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 some gigantic warehouse somewhere far away, where a loan broker will have to wander through the depths of the aisles searching for a box with your name on it… This is a ridiculous junk fee that should never be paid.
Consulting Fee -
Many brokers, moreso than lenders, will add this fee to your settlement sheet. Too often, since it indeed has a legitimate sound to it, many borrowers will not question it and will simply pay. However, this is actually a fee that you should not pay because it is vague and unnecessary. The explanation is that there is a fee the broker is passing on to the borrower for “consulting” with another professional or another company when evaluating your loan application. Most of the time, since computers make a large portion of the decisions, there is no consultation that is required. Even if there was a consultation, that is something the borrower should not be responsible for.
Endorsement Fee -
This is another legitimate-sounding fee that both mortgage brokers and mortgage lenders will add to the settlement sheet. Apparently, they are charging you to recoup the costs they incurred while getting your application and approval paperwork signed by the appropriate parties. Now, since we’ve never heard of a lender getting one of their applications signed by someone outside their own company, how can they claim that it was an expense to get your applicatoin signed?
Express Mail Fee -
Brokers and lenders will try to charge you for mailing your paperwork back and forth, usually claiming that they had no choice but to send your application overnight, or something to that effect. However, this is almost always untrue because there is rarely any actual paperwork during the application phase of a loan. Plus, mailing documents regarding your application is an ordinary expense for a loan company, therefore it should be absorbed by them. If not, these costs should be covered by your application fee or origination fee, and not an additional charge.
Document Preparation Fee -
Here’s another junk fee that brokers will usually try to sneak in on the settlement sheet. They’re trying to justify more money by claiming that they should get paid for preparing your loan application and other documents. Well then what does the application fee cover?
Miscellaneous Fee -
When lenders and brokers cannot think of any other legitimate-sounding fees to add to your settlement sheet at closing, yet they still need to pad their bottom line a little more, they’ll usually include a Misc Fee and state that this is to cover the other little thing that they couldn’t itemize or separate from everything else. Never pay this fee. The reason for itemization on your sheet is to make sure that nothing is vague or goes without explanation. Therefore, the concept of Misc Fees goes against the itemization.
Underwriting Fee -
Many brokers will try to add an Underwriting Fee to their charges at settlement, and many times this fee is a few hundred dollars. However, keep in mind that the mortgage brokers do not underwrite the loans! There is no way a broker should be paid for underwriting because their job is not to underwrite, but rather to pass your information to the lender. It is the lender who will underwrite your loan, not the broker.
Courier Fee -
Lenders will usually add a courier fee to the settlement sheet to offset their costs from shipping your closing documents to the escrow company. Many times, these charges will be in excess of $50. This is junk because part of the lender’s standard responsibility is to ensure your documents arrive at the appropriate places on time, and you should not be responsible for their procrastination. Plus, every major courier service (FedEx, UPS, DHL, etc.) charge less than $25 to ship documents overnight anywhere in the world. Keep an eye out for this fee, which is usually padded in addition to being junk to begin with.
If you find some of these fees on your mortgage fee breakdown. Talk with your mortgage broker and see if you can have some of them lowered or removed.
