Mortgage rates are down, but fees are up…

I read a good article by Amy Hoak at the Wall Street Journal Market Watch Web site, from which I took some of this post. Even though mortgage rates are at some of the lowest levels in years, borrowers may end up paying more due to the increased fees being charged by wary lenders. New rules by Freddie Mac and Fannie Mae are upping the fees for borrowers with less than perfect credit, those in the mortgage industry say. Other increased costs reflect the uncertainty in the mortgage market, as lenders try to reduce their risk and anticipate rates. New risk-based pricing from Freddie Mac and Fannie Mae adds fees to mortgages based on a borrower's credit score. In order to avoid the extra fees, borrowers need to have a FICO score of 740 or higher

The new fees, called Loan Level Price Adjustments, have been an unwelcome surprise for some homeowners interested in taking advantage of low rates. Other fee increases for borrowers today include those on underwriting and processing, which range from $300 to $400 on average. It takes more work and expertise to process a fully documented file than the no-document loans that were popular a couple of years back, and that is reflected in the higher charges. Those attempting a refinance can also expect to pay an appraisal fee -- maybe $300 or so -- up front. Mortgage rate lock fees are also becoming more common.
In total, mortgage fees could cost you 3% or so of the loan amount, according to HSH Associates, a mortgage-information publisher.

For sellers in our area, title and settlement fees, as well as the real-estate transfer taxes charged by cities and counties, make up the bulk of the fees that are charged to the seller in a sale. The total of all of those fees is about 1.5% of the sale price. Of course the seller pays the commission, too, which make up the bulk of his cost to sell.

With the advent of higher and more fees on the buyer side it all the more important to get a good faith estimate in writing from the lender, so that you aren’t surprised at the closing table. And make sure that you understand other fees that you’ve agreed to in the fine print of the listing and sales contracts. Most brokers are now charging a fee to help cover their costs, which some call a broker compliance fee and some have given other names. Both the buyer and selling side brokers will likely have a fee that is to be paid by the party that they represent in the transaction.

Many REO brokers who handle foreclosed houses now are trying to collect a special REO Management fee, which is there to cover some of their costs for managing the property and to cover the fact that the bank isn’t paying them enough (at least in their minds) for that work. That is a sore point with many buyers, since the REO Brokers are writing it into the sales contracts as a buyer paid fee. There have been lots of closing table arguments over that fee and it is a subject of great controversy amongst local Realtors.