Featured News 2012 Read the Paperwork Closely: The Hidden Fees in Your Mortgage Agreement

Read the Paperwork Closely: The Hidden Fees in Your Mortgage Agreement

No one likes junk. For most of us, when we think of junk, a heap of trash may come to mind. But there is another type of junk that is equally as distasteful- junk fees. These are expensive closing costs that are hidden in mortgage contracts. Often the customer is not aware of the cost of these junk fees beforehand. Admittedly, most people do not deal with real estate purchases on a regular basis. Buying a home or a piece of property is complicated, with stacks of paper work and a confusing new vocabulary to master. People normally do not buy a lot of homes, and may only deal with a real estate purchase once or twice in their lives.

This being said, the average individual is not intimately acquainted with all things real estate. In fact, most people simple want a real estate agent or a mortgage broker to hand them a piece of paper and point to where to sign. Yet when the process becomes this simple, you can bet that most mortgage brokers are leaving you out of a lot of important details, such as hidden junk fees in the lengthy contract. Because paperwork can be so dull and monotonous, the average American will skim it quickly, and wouldn't think of carefully calculating the amount of fees hidden therein. But all of the junk fees, also known as closing costs, will end up costing you a few hundred dollars if you don't read your paperwork closely.

According to Investopedia, closing costs are the total cost for a bunch of expenses that are tacked onto the purchasing and financing processes with your real estate. There are recurring closing costs and nonrecurring ones. A recurring cost is one that gets paid at the closing of a mortgage, and also on a monthly basis in the future. Oftentimes these recurring expenses are real estate taxes, and homeowner's insurance. Also, if you are putting less than 20 percent down on your mortgage, you may need private mortgage insurance. These payments are normally put up in advance, so that they can cover the next year's obligations. This is called putting the money in escrow.

There are also nonrecurring costs that must be paid at closing. You may need to pay points. These are initial fees that are charged by the lender. Each point is normally equal to 1 percent of the amount of the loan. Also, your lender may charge an application fee, a series of loan fees, and a broker's service fee. The loan fees often include all sorts of costs for services such as origination, appraisal, tax services, underwriting, wire transferring, office administration, document prepping, and credit reporting. If your lender required a home appraisal then you may be charged for this too.

You can also incur Federal Housing Administration fees, Veteran's Administration fees, and Rural Housing Service fees, depending on your situation. As well, some areas require a flood determination fee so that people can investigate whether or not the area is in a flood zone, and a land survey to define ambiguous boundaries. You may need to pay for title charges like a settlement, a title search, a title examination, a deed preparation, and a closing service letter. There's also a possibility you'll have to put up money for title insurance and to pay a notary or attorney.

With all of these expenses hidden in your mortgage documents, you will want to read very carefully. While some of these fees may be valid and necessary, there are times that they can be considered junk fees. A junk fee is normally an expense that is solely for the benefit of your mortgage broker. Application fees, underwriting fees, mortgage rate lock fees, broker rebates, and loan processing fees are the most common fees to watch out for in this category.

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