How to Avoid Hidden Home Loan Fees

June - 2 - 2010 Author: Samantha Davis Respond

Whether you’re a first-time homebuyer, or you just want to be sure you get the best deal the next time around, you need to be in on a little secret. Actually, it’s a big secret – hidden costs your loan officer is tacking on to your mortgage.

Most loan officers work on commission alone, all based on the fees associated with your mortgage loan. These fees are calculated on a “points” scale, with 1 point translating into one percentage point of your loan amount. For instance, if you take out a loan for $50,000, one point translates into $500. Loan officers typically split this commission 50/50 with the company they work for.

Now there are so-called “normal” fees that you cannot expect to get out of, including an 1) “origination fee” that represents one point, 2) plus one additional point.

But if you have good credit, you should be able to avoid:

1) Non-refundable, upfront application fees. If you have questionable credit, a loan officer will have quite a bit of work to do trying to push your loan through (i.e., they will earn that application fee). But if your credit is stellar, it should be an easy process. This gives you leverage in asking them to waive the fee and, if they won’t, simply take your business some place else.

2) Points on the back. Trying to squeeze every dollar they can from you, loan officers will try to sell you a loan at an interest rate above the going rate. Again, if you have good credit, you should be able to avoid this. The key is not putting all your eggs in one basket. Shop around so that you have muliple loan officers competing for your business and you’re guaranteed to get a better deal.

Click here for a more in-depth explanation of “points on the back” and other secret home loan fees.

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