Know Which 'Junk Fees' to Trash

Sunday, June 24, 2007

Q: I have a few questions about mortgage closing costs, "junk fees" in particular, such as document prep, origination, underwriting and processing fees. I will be closing on a home in a few weeks. I am getting my mortgage through a bank and have a credit score of more than 800. If I see those junk fees on the final papers, how can I successfully justify having them removed?

A: Sandy Gadow, author of "The Complete Guide to Your Real Estate Closing": You are wise to question several of the "junk fees" you may notice on your closing statement. However, the time to question those fees is before you see the final closing papers, as it can be difficult to get the lender to reduce or eliminate the fees at the closing table.

When you applied for your mortgage, the bank gave you a good-faith estimate, which outlined costs you would incur. Let's look at the other fees typically disclosed here.

The first category of charges listed are those items payable in connection with your loan. These may include an origination fee, points, appraisal fee, credit-report fee, mortgage-broker fee, underwriting fee, processing fee, courier fee and wire transfer fee. An origination fee and points are typically a set fee that you have agreed to pay to obtain your loan. It may be a percentage of the loan amount, say 1 percent.

An appraisal fee and a credit-report fee are typically not negotiable, as the lender or your mortgage broker will order these. Even though you may have an appraiser who will offer you a reduced fee to perform the appraisal, the lender may require that the appraisal be done by one of its "approved" appraisers. If you do, however, have an appraiser that is considerably less costly than the lender's, your appraiser can typically become certified by your lender by simply providing the lender with certain licensing certifications.

The mortgage-broker fee listed on the good-faith-estimate form is negotiable. The lender's inspection, underwriting and processing fees may be somewhat negotiable, but many lenders stay fairly firm on these fees.

Courier and wire-transfer fees are typically charged for transferring loan documents to the escrow closing company and wiring the loan proceeds to the closing officer. You may ask that these be reduced or waived. Ask if your lender has the ability to transfer the documents electronically. Verify that the closing agent has not marked up these fees.

But the numbers on the good-faith estimate are just that: an estimate of anticipated costs and expenses. The final numbers may not match the estimate because several charges may be pro-rated, which means calculated up to the day of closing, or up until the first of the month. The adjustment, however, should be slight.

Be sure you understand the charges before signing any documents. If you notice new charges or expenses on the final HUD-1 statement, ask why they were added. If you disagree with the explanation, ask to have them reduced or removed. Signing the closing documents means you have approved them and it is often difficult to make changes later.

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