Credit Report
It typically costs less than $50 to check your credit. Your lender, with your permission, will order a review of your outstanding loans and repayment history, from a third-party credit agency.
Application Processing Fee
Application Processing Fees generally cost around a few hundred dollars. This charge covers the lender’s work to evaluate your ability to repay the loan. Some lenders will credit this cost back to you upon closing.
What is APR?
The APR, or annual percentage rate, is the sum total of all your borrowing costs expressed as a percentage interest rate charged on the loan balance.
For example: After fees, the original interest rate quote of 5.875% might work out to a 6% APR loan, where the interest costs about $6,000 per year for every $100,000 borrowed, and the principal payments are calculated based on the length of the loan term (for example 15, 20, 30 years).
Indexes
The interest rates on variable loans readjust periodically based on changes in an index. Typical indexes include the federal funds rate and Treasury Bill.
Points
When mortgage companies are competing by offering lower interest rates, they may charge you a one-time pre-paid interest payment calculated as a percentage of the loan. Called points”, this may range from 0.25% to 2% of the loan balance, and is usually paid upfront. Points are tax-deductible; consult with your tax advisor.
Appraisal Cost
Experienced, often independent, appraisers are hired by lenders to evaluate the property’s purchase price, condition, and size, compared to similar recent neighborhood sales. This is done to help ensure that the purchase price is not too high, and, in the event that the borrower defaults, gives the lender confidence in getting repaid if they are forced to sell the property. Appraisal costs vary depending on the property, type of appraisal, and region.
Miscellaneous Fees
Expect to see various charges incurred in the processing of your loan which might include notary, courier, and county recording fees.
Prepayment Penalties
Prepayment penalties vary widely, so it’s important to note if your lender will charge a penalty if you choose to refinance or sell, and the time period in which the penalties apply.
