What Are All These Fees And Why Is A Mortgage So Expensive?
Did you ever surprise what a great credit score really gets you in the mortgage market? Many people think it method they get better pricing. Unfortunately, that’s not really the case. It mostly just method your lender won’t have to hassle you for as much documentation to do your loan. In fact, no documentation may be required from you at all if it’s a buy and you put enough money down. I’ve heard many clients say, “I’ve got great credit, so quote me your best rate.” Good credit can’t directly influence the rate. But it can influence your mortgage loan officer to give you better pricing. If your lender can be assured your loan course of action is streamlined and smooth, and that they won’t have excessive hours to devote to the time of action, they may be able to quote you a more competitive rate. Much about a quoted rate depends upon the man hours it will take to make your loan, the loan amount itself and how quickly you can close.
Lenders usually have a minimum percentage of income they are supposed to make on a loan. That percentage is flexible, but only to a certain extent. for example, the loan amount size is a huge contributing factor. If you’ve got a really large loan amount, your lender doesn’t need to have a feeding frenzy on your loan. The percentages lower because the payback is higher.
However, if you’ve got a really, difficult loan and a modest loan amount, you can expect higher rates or discount points. Or fees. Some lenders may raise your fees to make you think you’re NOT paying as much. But you are. You have to in order for the lender to cover the cost of doing business.
Here’s the secret. Closing a loan is truly a very involved course of action. Lenders can’t do the loans for free or break already profit because it’s a business and their in it for profit. Plus, there are many people involved in the loan course of action that you aren’t already aware exist. Processors, closers, post closers, insurers… a staff of thousands! Ok, so maybe not thousands, but your file is probably touched by 5+ different divisions (at minimum) within a mortgage company. Since it is a business, the lenders must make enough money on the loan to cover their costs and truly make money, too. The lender also pays outside parties for sets too, like the appraisal, flood cert and automated underwriting system. Paying your originator is just the beginning of the mouths (and families) being fed by your business. It ain’t cheap to close and sell a mortgage.
When you examine all the fees and charges on a good faith calculate, your lender should be able to tell you exactly where that money is going and how it is to be spent. Your lender should have no qualms in telling you what costs are associated with your loan, or which funds cover third party expenses that your lender incurs by doing your loan. And some of that money will be profit. Much of it may be. But remember, you’re not just paying the salary of only one person. However, you shouldn’t pay too much for your loan. After all, the lender will make additional profit on the loan when it is sold on the secondary market.
A good lender will validate any fees and charges for you and should make you feel OK with the fees. If they don’t seem reasonable or fair, always ask questions. If you don’t like the answer, say so. And if you nevertheless don’t like the answer, than look for a new lender. Buying a home is such an important buy and you should feel good about it.