Unnecessary Increases in Mortgage Closing Costs: Don't Make These 3 Mistakes

When it comes to closing on a home sale, there are certain closing costs that you'll need to pay in order to secure your mortgage and get the house. And although many of these closing costs are legitimate fees, some of them are "junk" fees banks and other lenders add to the mortgage application in order to make a higher profit.

You'll want to dispute these unnecessary fees, as they're essentially just a cash grab. So how can you avoid paying more in closing costs than you need to? Here's what you need to know.

Paying The Origination Fee When You Have Good Credit         

One common fee you'll see during a mortgage closing is the origination fee. Typically, the broker will charge this fee to low-credit borrowers as compensation for the extra time and effort involved in getting a mortgage approved. But if you have good credit, there's no reason why you should have to pay an origination fee, as getting your loan approved should be quite easy.

Before you sign your agreement, dispute your origination fee and try to get it waived or reduced.

Paying A Mortgage Rate Lock Fee - Ever         

If you choose to lock in a mortgage rate, you'll benefit from the consistency of knowing that your rate will stay the same for the duration of your mortgage loan. And for this service, lenders typically charge borrowers in the form of higher interest rates. In other words, the rate lock is already paid for in the loan itself.

That's why, if you see a rate lock fee in your closing document, you'll want to dispute it. There's no reason why you should pay twice for the same rate lock.

Paying An Underwriter Fee If You Use A Broker         

Depending on how you get your mortgage, you may or may not need to pay an underwriter fee. Typically, getting a loan through your bank will result in an underwriter fee if your bank underwrites its own loans. 

But if you're shopping for a mortgage through a broker, this fee is completely unnecessary. Your bank is underwriting the loan, not your broker. Your broker should already be paying the underwriter out of the brokerage fee, especially if it's a large brokerage that employs underwriters in-house.

Buying a house is expensive enough without unnecessary closing costs. That's why a mortgage advisor is a critical ally in the home buying process – your advisor can point out unnecessary fees and help you to avoid paying more than is required. Contact your local mortgage professional to learn more.