Title Insurance and Closing Services Since 1954
Lender Fees and required prepaid charges:
Lender fees are the actual expenses that the lender incurs in the processing of your loan. These fees generally are charged for items such as origination costs, appraisal, underwriting, processing, document preparation and administrative costs, etc. The buyer should always request that the lender or mortgage broker explain all fees prior to attending the closing, as these fees may add significant costs to your closing. After an initial meeting with a mortgage professional, the borrower will receive a Good Faith Estimate (GFE) that shows an estimate of the closing costs associated with the mortgage application.
Unless the seller agrees to pay for any lender fees in the purchase sales agreement, these fees are always charged to the buyer. Generally, lender fees have been estimated to cost between 2 and 3 percent of the amount being borrowed, however the fees vary widely depending on the type of mortgage loan chosen by the borrower.
If the borrower chooses to pay Loan Discount points, this cost would be disclosed as lender fees as well. Loan Discount points (commonly just called “points”) allows a borrower to buy down the interest rate by prepaying a fixed amount to the lender at closing. When comparing mortgages, it is prudent for the borrower to ask the lender to explain how the payment of points may or may not be cost effective for the particular loan situation of the borrower.
Prepaid charges are for items related to the mortgage that the lender requires to be paid in advance at closing. Typically, prepaid items consist of daily interest due to bring you current to the first of the month; costs for mortgage insurance and hazard insurance and/or flood insurance; and initial reserve amounts needed by the lender to establish an escrow account for the payment of future insurance premiums, real estate taxes, and homeowners’ association dues.