In addition to your down payment, there are closing costs that go into a mortgage. The down payment lowers your loan and goes toward the price of the house. The closing costs are fees paid for services rendered. Here are the seven most common and what they are for:
1) Origination Fee: The lender’s fee for processing, underwriting, and funding your loan.
2) Credit Report: Goes to the credit reporting agency that provides your tri-merge credit report to the lender. You have the right to know your credit score.
3) Tax Service Fee: Lenders use a third party service to ensure the property taxes are properly paid and posted. (You don’t want your property taxes going to the neighbor’s address.)
4) Flood Certification: Federal banking law requires lenders to determine whether or not the property is in a flood zone and needs flood insurance.
5) Escrow or Attorney: Federal law requires a neutral middle party to handle the disbursement of funds. They also sign and notarize your final loan documents, send the Deed of Trust to the county for recording, and perform other required tasks for your loan closing.
6) Title Fee: Insurance to protect your title against false liens and judgments, fraud, errors, and other incorrect encumbrances on your title.
7) Recording Fee: The local county charges to record your Deed of Trust.
None of the above fees are unnecessary, bogus, or junk fees. They are all costs for legitimate and required services.
Added, unnecessary fees would be things like Application Fee, Archive Fee, Doc Prep, Doc Fulfillment, Email or E-doc Fee, Wire Fee, and so on.
Discount Points are not a junk fee. This is when you choose to buy down your interest rate to a lower rate by paying a chunk of the interest up front. This is optional.
A no-fee loan means you are paying for the fees by taking a higher interest rate. One way or the other, you do pay required and necessary closing costs.
The seller may pay some or all of your closing costs. The real estate agent may not pay your closing costs, per federal banking law.
In addition to closing costs, there are “pre-paids.” These are not fees; but rather, your taxes and insurance as well as daily interest. (More about pre-paids in an upcoming blog post.)
There is a lot more information about fair and unfair mortgage costs than what I can put into a blog post. Feel free to check out my best-selling book that was chosen by The Washington Post as their Book of the Month (“Color of Money” book club). Mortgage Rip-Offs and Money Savers
The Beaver County Tax assessor snatched away Eileen Battisti’s house in foreclosure because she owed a mere $6.30.
They claimed they had the right to take away the Pennsylvania widow’s house, because they had sent the proper legal notices of the money due.
Really, tax people? How is that fair and honest treatment of a home owner who has paid their taxes faithfully over the years?
Eileen Batisti thought she had paid all past due bills after her husband’s death in 2004. She was unaware there was an outstanding balance due. Adding late fees and penalties to the $6.30, her bill shot up to $235.
Her house was then sold under value for about $116,000 to “some lucky buyer” getting a bargain.
But wait, there’s more!
Eileen wasn’t going to be defeated that easily. She filed an appeal of the sale in county court. And legally, the new owner could not take possession of the house while an appeal was going on. So Eileen has continued to live in her home.
Judge Mary Hannah Leavitt said the county’s action “was particularly inappropriate because the outstanding liability was small and the value of the home was far greater than the amount paid by purchaser.”
The Take-Away: If you don’t pay your property taxes, the county can foreclose on your home, even if the mortgage is paid on time. And, if there is a gross inequity, such as what happened to Eileen Battisti, you do have the right to appeal.