Origination Fees on Purchase and Refi Loans
By Chuck Simmons
05/17/2006
A home mortgage loan is like any other major purchase, and you’ll find that there are always additional fees or closing costs involved. Knowing these fees in advance will save you a great deal of heartache in the future. You’ll know what you need to come up with in cash at the close of the loan, as well as any hidden fees that a lender may try to tack on. Knowing what fees are mandatory and which are optional could save you thousands.
First, you have the origination fee. This is the fee that a mortgage broker or loan officer charges you to complete your refinance or new purchase loan. This is a mandatory fee that everyone charges. If you’re told that there is no origination fee, then it’s probably built into your interest rate and you’ll end up paying more in the long run. Typically this fee might be as much as 2% of the total loan – pretty hefty but there’s not much that can be done about it. You’ll pay one way or another.
If you have bad credit, then expect to pay even more – three to five percent. As a sub-prime borrower, and have issues such as a recent bankruptcy or foreclosure on record, then the effort involved with finding you a loan will be translated into added fees. If possible, try to clear up any civil judgment (or criminal), tax lien or other issues if at all possible. A good mortgage broker may be able to clear up your leins for you, but doing some yourself can only save you money and get your loan processed faster. Collections companies often buy these accounts for pennies on the dollar and you can usually negotiate a good rate.
If on the other hand, you have perfect credit, a large amount of equity and cash reserves, then this process becomes much simpler. You can probably get away with paying about one percent, rather than the usual two, and your loan will be processed faster. You’ve got what’s known as “A Paper.”
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