Searching for the best interest rate is important when looking for a mortgage lender. However, in addition to shopping around for interest rates, be sure to understand what fees the lender is charging you.
Most fees you are responsible for are called closing costs. These costs are to be paid by the homebuyer at closing.
Freddie Mac defines closing costs as costs (also called settlement fees) incurred as part of the homebuying process. These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Generally, closing costs range between 2 - 5% of your purchase price.
There are generally two categories for fees, third-party fees and lender fees. Typically, you won't be able to avoid paying third-party fees, such as appraisal, credit report, and title insurance to name a few. These fees are services conducted by a third-party and not by your mortgage lender. No matter what lender you go with, these fees will need to be paid.
However, each lender will have a fee for their costs in processing and underwriting your loan. This fee can vary from lender to lender. When evaluating which mortgage lender to go with, make sure you are doing a fair comparison. Some vendors may only be quoting you their lender fee, while others will quote all closing fees.
Closing costs associated with your mortgage loan can add up. It’s important to understand what these fees are for, who’s charging you, and where can you save money. Be sure to ask your lender about all closing costs to better prepare for expenses when buying a home.
Interested in learning more and how to potentially save money on lender fees, speak with a licensed Home Loan Advisor today.