“I always tell my team members we want to talk to our members like we’re talking to family,” said Kevin Parker, Vice President of Field Mortgage at Navy Federal Credit Union .
“What advice are you giving your mother?” he continued. “The advice I’d be giving my mother is: If you’re getting a mortgage, you want to make sure you’re able to itemize each individual fee.”
Ask each potential lender for an itemized list of fees
If you’re considering multiple lenders, ask each one for a list of fees. Lenders will give you a loan estimate, which is “the official document that basically itemizes all of the fees on that loan,” Parker said.
Once you receive loan estimates from your top lender options, you can compare the fees from lender to lender and choose the lender that will give you the best deal .
Parker said you can typically request a closing cost estimate before officially submitting an application. A closing cost estimate will be more generalized than an official loan estimate, because steps such as a home appraisal won’t have happened yet. But the closing cost estimate will still give you an idea of what fees the company charges.
Once you’ve chosen the home you want to buy and are ready to apply for a loan, the lender will do a hard inquiry on your credit report and provide an official loan estimate that is more detailed.
When you have loan estimates from multiple lenders either the closing cost estimate or the official estimate you can compare origination fees, appraisal fees, underwriting fees, and anything else a lender might charge.
Search the estimate for pass-through fees and junk fees
“Some lenders will charge you and they have the right to do so an ‘underwriting fee,'” Parker said. “They’ll charge you ‘processing.'”
Costs that sneak up on borrowers and don’t have an obvious purpose, such as underwriting fees and processing fees, are often referred to as “junk fees.”
Lenders will also impose what are known as “pass-through fees,” which are charges with clear purposes. For example, the lender will charge an appraisal fee because the appraisal company itself charges a fee.
All lenders charge pass-through fees, and many charge junk fees. However, you can find some that charge less for junk fees than others, and even lenders that don’t charge junk fees at all.
Even if you do choose a company that charges excessive fees, it’s good to know about those charges from the get-go rather than finding out when it’s time to sign the closing documents.
Which is more important: low fees or a low interest rate?