4 Ways to Spot Mortgage Junk Fees on Your Loan Estimate
4 Ways to Spot Mortgage Junk Fees on Your Loan Estimate
A few minutes with page two of your Loan Estimate can show you whether a lender’s fees are reasonable or padded, long before you reach the closing table.
A mortgage quote usually leads with the interest rate. The fees behind that rate get far less attention, even though they can separate two offers that look identical on paper.
Those fees matter more this fall. The average 30-year mortgage rate climbed in October to its highest level in nearly three years, according to the Mortgage Bankers Association. Every dollar paid at closing now sits on top of a heavier monthly payment.
“Junk fee” isn’t a legal term. In practice, it describes a lender charge that duplicates another, carries a vague name, or costs more than other lenders charge for the same loan.
As mortgage brokers, we compare offers from multiple lenders, and these four checks are where we’d start.
1. Expect one fee before your estimate. A lender must send your Loan Estimate within three business days of your application, on the same standard form every lender uses.
Until you receive it and decide to proceed, the only fee a lender can collect is the cost of your credit report. The CFPB says that typically runs under $30, so a request for an application fee or deposit before that point is a warning sign.
2. Section A holds the lender’s fees. Origination charges are the largest single category of closing costs, according to the CFPB. They appear in Section A on page two of your Loan Estimate.
A typical origination fee runs roughly 0.5% to 1% of the loan amount. Some lenders show it as one figure, while others split it into processing, underwriting, and document preparation charges.
The split itself isn’t a problem. What deserves scrutiny is overlap between charges, or a pile of small fees that lands well above the typical range.
“The fees behind a rate can separate two offers that look identical on paper.”
3. Compare totals, not fee names. Because lenders label their fees differently, the CFPB recommends comparing Section D, Total Loan Costs, across your offers.
Request each estimate for the same loan amount and loan type, ideally on the same day, since rates move daily.
A competing estimate is also your strongest negotiating tool. Lenders are often willing to match or beat a better offer.
4. Hold the lender to its estimate. Your Closing Disclosure must arrive at least three business days before closing, which gives you time to check it against your Loan Estimate.
Fees paid to the lender or broker generally can’t increase unless your circumstances change, such as a new loan type or a different down payment. If nothing like that has changed and those fees still go up, you’re entitled to a refund of the difference.
Get a second look before signing. If something in Section A of your Loan Estimate doesn’t add up, send it our way. We’ll walk through it line by line and show you how it compares with what other lenders would charge.
Call or text us at
(602) 581-3658, email us at
info@patpm.com, or visit
patpm.com. We’re glad to take a look whenever you’re ready.
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