When you close on your mortgage, there will be certain fees that are connected with the loan, and lenders are obliged to tell you in advance as to what they will be.
The GFE should list the entire terms of the mortgage, including the period, rate and points (which most borrowers know before they apply), but especially the closing costs.
One thing that makes this statement difficult to understand is that there is no standard that all lending institutions use, so they may use different terminology.
It is not a surprise to learn that some borrowers find this confusing.
When you receive your GFE, you will have the time to examine these fees in the “Total Estimated Funds Needed to Close” section. Here the borrower will see what costs he will be responsible for.
The biggest cost in the statement will be the loan origination fee. Some very competitive lenders may charge a flat fee, but most charge a percentage of the mortgage, between .5% and 2 %. With a large number like this, most home buyers would like to make sure that the charges are correct ahead of time.
An appraisal is required on the property, and the buyer will be charged for this. But you can assure that their charges are reasonable by comparing it to other appraisal companies. The three day review period gives you the time to do this.
The borrower should review the processing fee. This fee represents the labor the lender puts into the loan to get and go over the information. Some lenders show the items separately. Often, lenders can negotiate these fees.
The underwriting fee is another fee on the closing statement. The lender will charge for the collection and review of documents relative to the approval of the mortgage, and this is called the underwriting fee. This is information vital to the decision if the mortgage will be approved.
Title fees and attorney’s fees are the fees made by a title agency or an attorney to manage the closing. You may be able to use your own attorney to lower this fee.
The mortgage broker’s fee will be listed, if you are paying the commission. There will be no broker’s fee listed if the lending institution is paying the commission. If the buyer has to pay, he sometimes has some discretion in how hight they are.
Next, review the fees related to the home itself. The seller may have paid homeowner’s insurance and taxes ahead of time and will receive a credit on the closing statement for the period covered after the closing date.
Be alert for charges that are combined. You should ask for an itemized list of those items. The GFE is an estimate, but it should not stray too far at closing from the original amounts you were supplied with. To make sure, ask for a copy of the final settlement form the day before the closing so you can look it over once again.
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