Many people think of a mortgage as simply the amount of money you borrowed from a bank in order to purchased your home, plus the interest that accrues on that borrowed money as you pay it back over the course of a few decades.
Like most financial matters, however, things aren’t quite as simple as they seem. When you’re dealing with mortgages, you often have to contend with a variety of additional fees and costs that can really add up. So if you’re looking to invest wisely by purchasing your own home, or if you’re looking to re-finance your home with a second mortgage, it pays to know what all fees are involved, and how they’re going to affect your bottom line of this ‘good debt‘.
Generally speaking, there are five major types of fees associated with mortgages, and the more intimately you know them, the less likely you are to be taken by surprise when one shows up on your contract and you’re suddenly obligated to pay it. These are the starting cost, the credit report fee, the appraisal fee, the processing fee, and the administration fee.
The starting cost is the fee charged by whichever institution it is that ends up providing you with the loan (usually a bank). Usually, you’ll want to keep this figure as low as 2 to 3%, but sometimes, of course, this isn’t exact feasible. Your particular circumstances will vary, but keep the 2 to 3% figure in mind so that, if you find yourself faced with a fee much higher than that, you know you might need to start looking for another lender.
Of course, none of this is going to happen at all without a credit report. The problem is, it cost money to have your credit checked, and the lender isn’t going to put up that money themselves. They’ll charge you a small fee for the trouble. Usually, this isn’t terrible significant, and doesn’t often exceed $20, but it’s still worth mentioning, just so you don’t get a nasty surprise when you least expect it.
Of course, the appraisal fee is a huge part of financing (or re-financing) a home. An appraiser will look at the home in question and give his or her professional opinion on the condition and value of that home. This will determine the amount of the loan that will be given. Of course, appraisers charge a fee for their services, as this is how they make their living. Oftentimes, you can end up paying many hundreds of dollars for an appraisal fee.
Then, you have the processing and administration fees, which are paid to the individual who deals with the actual paperwork, filing, and legal processes that go into the purchase and entitlement of a home. Usually, this will run you about the same as the appraisal fee, and as such, can become rather significant.
Financing a home can be a big step, but if you’re duly prepared ahead of time, you can avoid at least one of the unpleasant aspects associated with the process – hidden fees that might otherwise take you by surprise and derail the whole process.
Tags: Business, Mortgage loan, obligated, financial matters, actual paperwork, mortgages
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