Whether obtaining a home purchase loan or a traditional refinance, there are fees that must be paid for this service. These fees, which represent various services that are a part of putting the loan together, generally fall into different categories. Basically, understanding third party fees in a mortgage will also give a clearer picture of the amount of work that must be performed in order to reach a mortgage approval. Below are 8 common third party fees that are charged to mortgage borrowers:
1. Appraisal Fee
The appraisal fee is the actual cost of the appraisal which is performed by a licensed appraiser. The appraiser must physically visit the property in order to evaluate the condition and value of the home. The appraiser’s report will also be completed with additional information that the appraiser will obtain from various sources. Appraisal costs will vary and if the appraiser must visit the property a second time, there may be an additional charge which will be added to the closing costs. Costs for FHA appraisals and VA appraisals are usually higher than those for conventional loans since these appraisers must be approved by the specific government agency that is insuring the mortgage.
2. Credit Report Fees
The lender must pull a credit report which is actually three reports combined into one. This is usually a flat charge which the borrower must pay. However, any corrections or updates to the credit report can incur higher credit report fees. In most cases, the lender will collect the appraisal and credit report fees at the beginning of the mortgage application and any additional charges will be added to the closing costs.
3. Flood Certification Fee
The mortgage process includes pulling a Flood Certification for the property. This must be done because flood maps are often changed and updated. In addition, if a property is in a flood zone, flood insurance will be required by the lender.
4. Inspection and/or Pest Fees
While home inspections and pest inspections are not mandatory for most mortgages, it is usually recommended especially with home purchases. An inspection is separate service from the appraisal.
A survey is another type of inspection which is an examination of the boundaries of the property done by a surveyor. Previous surveys can often be used provided that there has not been any major changes done to the property and is often done when refinancing.
6. Title Insurance/Title Fees
Title fees include several services performed by title companies. The lender will use a title company who will investigate and research the title in order to make sure that there are no existing liens. In addition, a mortgage requires that title insurance be carried.
7. Settlement Fees
In many states, the title company will also be the agent who performs the actual closing of the mortgage when all papers are signed and funding takes place. However, the final closing can also be done by an attorney or a notary. Settlement fees are charged to cover the costs of this service and vary depending upon the services provided and the location of the property.
8. Postage/Courier Fee
This is the cost of transporting documents from one place to another.
These represent the most common third party fees that are charged to borrowers either before or at the closing of a mortgage. Fees will vary from lender to lender and depending on the region. Since some of these fees are paid before settlement, they may appear as POC or Paid Outside of Closing on the HUD1 Settlement Statement. Other fees paid by other parties may also appear as POC.
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