Home Buying in Austin Hills>Question Details

Texas Gal, Home Buyer in Austin Hills, Austin,...

HOW do I lower the ridiculous fees when getting a loan??

Asked by Texas Gal, Austin Hills, Austin, TX Thu Jan 20, 2011

We are borrowing 170,000. The final fee total, called the Estimated Settlement Charges, comes to nearly $9000. That seems RIDICULOUS. Bank automatically added a loan discount fee of $1700 for the interest rate I got. The lender fee is 750, and with Doc Prep and Underwriting fee, it totals 979! Then there is a 300 Closing/Escrow fee, 50 Courier Fee, 275 Lenders Title Insurance, 600 Survey, 475 Appraisal, 1800 Owners Title Insurance. On and on. Seller already paid for home inspection, yet bank has to do another one for 350. WHY? HOW do I get all this lowered?? What is negotiable: what is not??

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From Texas Gal: here is what I have learned from all of you based on the actual fees that have been presented to me. Interest rate is 4.625. I have a top credit score. What is going on here?

Underwriting fee: $54.13
Lender fee: 750 **Normal
Document Prep: 175 **Normal


Loan Discount Fee: 1720 (I can remove this & go up in interest rate .25, correct?) **Yes that is correct. You should be able to get a 4.75% rate with 0 discount.
Appraisal Fee: 475 (One of you said too high. 400 normal. Get them to use different appraiser?) **The lender will not use a different appraiser. The lender does not get to select appraisers per HVCC. So the fee is what the fee is.
Credit Report Fee: 21.11 **Normal
Flood Certification Fee: 8 (why? It's not in a flood area, says survey) **This is for a Life of the Loan Certification and is required on all loans. It proves to the lender that the property is or is not in a flood zone.
Closing Escrow Fee: 300 (Can't change this, correct??) - **That is correct and this is a escrow fee for the closing agent to handle your escrow.
Lenders Title Insurance: 275 (Can't change this, correct??) **That is correct and this fee is regulated by the Texas Insurance Commissioner. It insures you and the lender for clear title and any endorsements required by the lender.
Tax Certificates: 75 **A 3rd party fee paid by the closing agent to obtain the property taxes owed and/or paid against the property.
Courier Fee: 50 (Junk fee, correct?) **No, this is not a junk fee. The title company must send the original signed documents back to the lender at closing.
Tx. Guaranty Fee: 5 ** Required by the State of Texas
Owners Title Insurance: 1800 (why am I being charged this on other page?) **The charge is probably being shown on your Good Faith Estitmate of Clsing Costs. Per Federal Regulations, the lender must disclose certain fees on the GFE, even if they are being paid by the seller. This is one of those fees. The GFE does not show any seller credits nor fees that have already been paid. The HUD I (closing statement) will show a charge on page 2 for owners title policy and a credit on page 1 for owners title policy, if the seller is paying the title policy (check your offer to purchase)
Pest Inspection fee: 150 (Required??) **Did the appraisal or the purchase agreement request a pest (termite) inspection? If not, then your HUD I will not reflect this fee. The lender is over disclosing just to be save. Talk to your loan officer.
Survey: 600 (Why doesn't other survey count done in 1992?) **The survey can be used as long as there have not been any changes to the property. Normally what happens is if box 6 C (1) is checked with the At Buyers expense, the lender does not know when they issue the GFE if the title company will accept the existing survey. If they do not and this box is checked, then you will have to pay for a new survey. If 6 C(2) is check, you approved to pay fort a new survey, and if box 6 C (3) is check then the seller will pay for a new survey.
Home Inspection: 350 (Already inspected by seller!!) **Then it you will not have to pay and there will bre no charge on your HUD I. Then lender does not know when they issue a GFE if this has been done, so they over disclose.
Mortgage Recording Charge: 150 (What is this?)** This is to record the deed of trust for your new loan against the property.
Hazard Insurance Premium: 1080 (Assuming this is required?) **This is just the lender's estimated fee, you will obtain your own insurance and the premium will be what you approve with the company you select.


Loan Amount: 172,000 (we are paying good down payment)
Principal and Interest: 884.32
Appraisal Credit: 100 (Credit where?? I don't see it) Hazard Insurance: 90
Survey Credit: 600 (Credit where? I don't see it);
Real Estate Tax: 342
Estimated Pre-Paid Items/Reserves: 1363.33
Pest/Home Inspection & Home Warranty: 1000 (combines all three above)
Estimated closing costs: 5938.24 (totally different from other page, where it's $9000)
Discount (Borrower Paid): 172 (where? what?)

I can't tell on the above group of charege, which form you are looking at.
5 votes Thank Flag Link Thu Jan 20, 2011
Texas Gal,
Plain-old communication does wonders - ask your lender and your agent to explain the fees. Some are lender fees, others fall outside (ie title policy). Ask questions. If you don't get a clear answer, look somewhere else.

Also, second opinions in medicine and real estate are a good idea.

Good luck!
Web Reference: http://www.crowehomes.com
2 votes Thank Flag Link Thu Jan 20, 2011
Josh is on point here. Get a quote from him or other lenders. Hopefully it is not too late in the process to make a change and avoid some of the fees. It would help to know what your interest rate is, who the lender is and whether this is a bank owned property.
2 votes Thank Flag Link Thu Jan 20, 2011
Lea Shaw seems to have a great handle on the situation. WOW! She really took the time to break it down line by line. Can I give another Broker a "Thumbs Up"?!? If so way to go Lea!!!
;)
1 vote Thank Flag Link Thu Jan 20, 2011
Dear Texas Gal:
You apparently did not have a loan officer that failed to explain what the fees are for or failed to get a good explanation. Call them and ask for an explanation. The only thing that I see as questionable is the $350 for the inspection. Lenders don't require an inspection; it is for your protection on all the appliances, plugs, a/c, etc. On some loans they may require a different appraisal; but, it is not listed as an appraisal.
You can have the lender pay the closing costs; however, there are free rides...you will have to pay a higher rate.
It would be nice to know is the home here in Austin and what was the sales price.
You are welcome to contact me if you care to visit about this more and I will be happy to explain it.
1 vote Thank Flag Link Thu Jan 20, 2011
Sounds like a major bank transaction. They typically post an interest rate that includes a one percent or more discount. One percent is inexpensive if it reduces rate by .25 % assuming that you will be have the loan for longer than 5 years without a major principal paydown,.

The $750 fee is their origination fee and the underwriting and doc pre fee are reasonable , abeit junk fees. The flood cert is required to validate that the property doesn't require flood insurance. The closing fee is reasonablly charged by the title company as is the lender's title insurance fee (you pay this if the property is financed). Tax cert is a customary required fee that protects the lender. Courier fee is charged by the title company for a service rendered.
TX guarantee fee ?
The owner's title policy is negotiated in the contract to purchase. You must have agreed to pay it at that time.Seller'soften pay this fee.
The pest inspection fee is often $150 when performed seperately from the property inspection and is required by many lenders (you should want this inspection for your own comfort as well). If performed when the property inspection is done, the pest inspections should be more like $75, on average.
Survey sounds high unless you ave a large lot. Depending on the old survey age and whether their werimprovements, the title company or lend may require the new survey.
Who pays the HOA certification and other HOA fees isnegotiated in the contract to purchase as is the home warranty.

Recording fees are an actual charge that is passed through to the borrower to record the mortgage in the county records.

Daily interest is charged for the days from closing to the end of the month for your mortgage loan. Your lender should explain how interest in arrears works and this charge is determined.

The Hazard insurance premium is required by the lender, and you should have your home insured even if you don't have a loan. The first year's premiumis payin in advanced at or prior to the loan closing.

On the whole, the fees are legitimate. Who pays them is negotiated. Either your agent or lender, as appropriate is the party who should explain this to you at the time that you begin the purchasing process.

Hopefully, this information helps.
1 vote Thank Flag Link Thu Jan 20, 2011
Hello Texas Gal,

Many of those fees you are able to shop around for. Your lender fees will vary greatly from lender to lender. I am also a Mortgage Broker and my total fees are much less than using a traditional bank. My rates are also lower by about 1/2 point. So for the same rate and fees a bank is giving you I can typically give you the same rate with much lower fees.

Your discount fee of $1700 is most likely an origination fee. Under the current rules Banks and Bankers can hide origination fees as discount. In reality it is very rare or necessary to use discount to achieve a desired interest rate in todays market. Assuming you are not being charged a separate origination fee the discount fee is fine and fair depending on the interest rate you have been given.

You can also shop title fees but they will not vary by much. Many of the fees they charge are regulated by the state of Texas. Title companies will vary with their additional fees and some will be more competitive than others. There are many bare bones title companies that can complete these a sale or refinance transaction for less but in reality it is probably not worth trying to use another company especially since the seller is paying the majority of the title fees as a whole.

When looking at your total settlement charges you do need to look carefully and subtract things like your home owners insurance, escrows and prepaid interest because these are not fees but true costs that need to be paid at closing.

Over the past 2 years while interest rates have been historically low we have been doing a lot of refinances for our clients. Because of the low rates it has been possible to pay all or most of our borrowers closing costs with a slightly higher interest rate.

For example: You may qualify for the lowest rate possible. Currently my best 30 year refinance rate is 4.5%. That rate does not cost any discount and is close to what is called a par rate. Now a client may choose a slightly higher rate of say 4.875% which would give you a credit of about 2% or $3400 based on your loan amount of $170,000.

Your monthly payment would increase by about $38 but it would take you almost 90 months or 7.5 years to essentially break even with the $3400 credit you received for the higher interest rate. Most of my clients are choosing this option as it reduces their total closing costs.

I hope this helps explain some of the different options you have and I wish you the best of luck with your new purchase.

Don Groff
REALTOR | Mortgage Broker
Keller Williams Realty | 360 Lending Group
512.669.5599
listings@dongroff.com
1 vote Thank Flag Link Thu Jan 20, 2011
Dear Texas Gal,
I would call your loan officer and see if they have any wiggle room to pare down some of the fees. In my experience a survey should not be $600 unless its for a lager than average lot say over an acre. The bank inspection fee might really be for the home appraisal, that is a normal fee I did not see listed on your fee breakdown. An appraisal is a normal fee of about $250-400. Your best bet is to speak with them and see if they can trim any of these fees. Sometimes it works, sometimes not. I wish you the best of luck on this transaction!
Sincerely,
Betina

Austin Home Girls Realty
1601 W. 6th Street
Austin, Texas 78703
(512)771-6318
1 vote Thank Flag Link Thu Jan 20, 2011
Texas Gal,

Hello. All of these fees seem within reason. These are closing cost associated with purchasing a home. The lender fees are seperate from the other fees. Each lender will charge you a loan orgination fee equal to a percent of the loan amount. Title companies are regulated by the dept. of insurance, so these fees are standard with each title company. If you are looking to "lower" the fees associated with purchasing a home, I have a unique real estate company where we give a large percentage of our commissions back to our buyer clients. Working with us as your buyers agent could reduce these fees by half.

Let me know if you have any questions, as you are my ideal client, one who is savvy and knows what you are looking for in a home. I pay my buyer clients for that ability.

Keep in mind that we are a non-traditional type of real estate company with the best buyer rebate program in town.

P.S. I love referrals! If you ever have a friend of family member, who is tech savvy looking to find a home in the 170k-500k range, and would appreciate a New Way of Buying a Home in Texas, please refer them to http://www.Buy75.com

BuyersHouseRealty is the virtual evolution of real estate, and we firmly believe in educating buyers! So much that we pay our buyers for their education! Learn more>> http://www.buy75.com/learn-and-earn/why-choose-buy75

Happy House Hunting,

Gavin St.Louis
Managing Broker/Owner
BuyersHouseRealty
877.77.BUY75
"The Real Estate Deal
Web Reference: http://www.Buy75.com
1 vote Thank Flag Link Thu Jan 20, 2011
It always pays to shop around, just as if you were buying a car. Take that estimate to another lender and show it to him/her. You'd be surprised at the results!

You also have to realize that several of the fees you've listed are not charged by the lender but by the settlement company or, as with the appraisal, an outside third party.
1 vote Thank Flag Link Thu Jan 20, 2011
You should go with a different lender, I would be glad to help. Here is where your getting taken advantage of and what fees are legitimate. Was this a HUD or foreclosure purchase. I see alot of fees which the seller should be paying for as well?
Bad Fees loan discount, this is commonly told to the client, "I have to charge this for this rate", rarely true, you dont have to or want to pay a loan discount fee which is the same thing as an origination fee.
The Lender Fee, whatever this is, Doc Prep and Underwriting do seem a bit high. Normally Processing, Underwriting and Doc Prep should come to around $1500
The appraisal seems high, should be $400
Typically the seller pays for owners policy and you pay for the lenders policy, unless this is a HUD or foreclosure sold home
Typicallly the seller has an existing survey or pays for this, unless this is a HUD or Foreclosure sold home
The extra inspection is very unusual as well.
Good Fees, you will always have closing/escrow, and the lenders title insurance, the courier fee is kind of BS, but nothing you can do about. The title company probably sent one piece of mail.
Are the sellers paying for any closing costs??? What rate did you get locked?
My analysis, is your being overcharged
1 vote Thank Flag Link Thu Jan 20, 2011
Discuss the fees with your lender, but the only fee I see that raises my eyebrows is the 350 bank inspection fee. not sure about that one. To lower your fees, accepting a higher interest rate can waive the 1700 discount (origination fee). also you could request the bank to give you an above market rate. This in effect will cause the bank to receive a premium (opposite if a discount) which can be used to cover some of the other lender fees. Good luck.
1 vote Thank Flag Link Thu Jan 20, 2011
I just wondered how it all ended up for you, Texas Gal. Did you make it through the homebuying process and were you happy with the way the loan ended up. You definitely received excellent advice from the Austin real estate and mortgage community!
0 votes Thank Flag Link Fri Apr 8, 2011
Although I don't have personal experience with this, I recently read an article that had interviewed some people in the lending business. They basically said that it was a little-known fact that almost all closing costs in a real estate transaction are negotiable. People just don't question lenders because they think the costs are set in stone. It sounds like you've gotten a lot of good advice on your situation, but just remember in the future, always ask questions. It could save you a lot of money.
0 votes Thank Flag Link Sat Feb 5, 2011
Hi Texas,

The lender fees and discount fees seem a little high. You should make sure they are giving you their best deal based on your credit and current market conditions. Did you shop around for your loan? Many of the fees you've outline are very standard and seem to be in line with normal market fees. Your bank has to have an appraisal which is not the same as a home inspection, your lender likely requires title insurance for them (yours should be optional), title companies have to get paid for their work. Your Realtor and lender should be giving you a detailed breakdown and description of each and every charge. Keep in mind you can negotiate to have the Seller pay some or all of these fees for you!
0 votes Thank Flag Link Sun Jan 30, 2011
Hey, that's terrific news! I beat the drum - communicate, communicate! - for a reason. Too often, both sides make assumptions and confusion, anger, something else is the result. When you ask questions, you get rid of fuzzy grays and black/white is typically revealed.

Good luck with the closing, Texas Gal!

-J
0 votes Thank Flag Link Tue Jan 25, 2011
Texas Gal,

Each lender/broker has their own fees for the closing costs but they shouldn't deviate that much from each other.

I'm assuming this is a purchase loan since there is an owner title insurance. That insurance will be paid by the seller. As far as the discount point goes, you are paying it to lower your interest rate.

We offer $500 flat lender fee with no point market rate. Our website is: http://www.mylendingplace.com

Let us know how we can help you.
0 votes Thank Flag Link Mon Jan 24, 2011
To everyone:

I did talk to my lender and I have a better understanding. All the figures are "estimates". Some are higher than they will be. Some won't even be charged. And there are discounts listed at the bottom of the page. It looks like our closing fee will be closer to $4000 once things are subtracted, some paid by the seller, and others end up being lower than projected. I'm relieved.
0 votes Thank Flag Link Thu Jan 20, 2011
okay...some of these are fixed, and required by the state. Loan discount fee...although you paid for the itnerest rate reduction/discount (called a buy-down), if you hadn't...the monthly payment increase x length of the loan would far outweigh the discount. Your choice on this, but up front best. other fees are set...except Owners Title Insurance, which is optional...i recommend this to all buyers. This protects you against liens and defaults on the title that you don' t know about. It is like anything else you pay for 'insurance"... you may not need it, but if you do...it far outweighs the cost. The additional inspection could be for a state or lender-required inspection tied to the loan...I don't know the rules in Texas. The only items that are negotiable are the buy-down for a lower interest rate...not negotiable, but could be removed. again the additional you pay for the higher interest long term is more than the buy-down. skip the owners title insurance...i wouldn't, but it is your choice. a one-time fee. the other fees are not negotiable as many are set by the state or county. hope this is helpful. ask your realtor....
0 votes Thank Flag Link Thu Jan 20, 2011
In regards to (potentially) being charged for a second inspection; (not knowing the details of the property you are purchasing,) I did have a lender require a second inspection (and appraisal, unfortunately for my buyer) due to the title being transferred twice within 90 days (it was a flip.) You've received plenty of good information regarding your other fees - none of which stood out to me as irregular (barring your Texas specific fees, for which I have no experience.)
0 votes Thank Flag Link Thu Jan 20, 2011
Just be nice and feel free to pay it... Money is distributed to each 'category', I am sure they deserve it....
you can,t get the loan without the appraiser, you can't close without the escrow, lender and bank needs to be paid for thier service being provided to you so that you can buy your home, underwriters I am sure have worked hard to get you approved, etc etc.....
0 votes Thank Flag Link Thu Jan 20, 2011
One more thing, have your lender or the title company explain the new closing statement to you. You may be getting credits from the seller for some of the costs. That seems to be the case based on the information you provided. They can also explain the prepaid charges that go into your escrow account at the lender and tax prorations..
0 votes Thank Flag Link Thu Jan 20, 2011
If you would like me to send you a GFE to compare, please email me at josh@jkohlmortgages.com
0 votes Thank Flag Link Thu Jan 20, 2011
From Texas Gal: here is what I have learned from all of you based on the actual fees that have been presented to me. Interest rate is 4.625. I have a top credit score. What is going on here?

Underwriting fee: $54.13
Lender fee: 750
Document Prep: 175 (These three come to 979. One of you said they normally come to 1500.)

Loan Discount Fee: 1720 (I can remove this & go up in interest rate .25, correct?)
Appraisal Fee: 475 (One of you said too high. 400 normal. Get them to use different appraiser?)
Credit Report Fee: 21.11
Flood Certification Fee: 8 (why? It's not in a flood area, says survey)
Closing Escrow Fee: 300 (Can't change this, correct??)
Lenders Title Insurance: 275 (Can't change this, correct??)
Tax Certificates: 75
Courier Fee: 50 (Junk fee, correct?
Tx. Guaranty Fee: 5
Owners Title Insurance: 1800 (why am I being charged this on other page?)
Pest Inspection fee: 150 (Required??)
Survey: 600 (Why doesn't other survey count done in 1992?)
HOA Certification: 200
Home Inspection: 350 (Already inspected by seller!!)
Home Warranty: 500
Mortgage Recording Charge: 150 (What is this?)
Daily Interest Charges: 283.33
Hazard Insurance Premium: 1080 (Assuming this is required?)


Loan Amount: 172,000 (we are paying good down payment)
Principal and Interest: 884.32
Appraisal Credit: 100 (Credit where?? I don't see it)
Hazard Insurance: 90
Survey Credit: 600 (Credit where? I don't see it);
Real Estate Tax: 342
Estimated Pre-Paid Items/Reserves: 1363.33
Pest/Home Inspection & Home Warranty: 1000 (combines all three above)
Estimated closing costs: 5938.24 (totally different from other page, where it's $9000)
Discount (Borrower Paid): 172 (where? what?)
0 votes Thank Flag Link Thu Jan 20, 2011
Call Ashby, he is the most competitive lender I know.

Ashby H. McDonald
Highlander Mortgage, an affiliate of AdvantageOne Mortgage, Inc.
512.501.3624 Direct
512.219.7730 Fax
ashby@highlandermortgage.com
0 votes Thank Flag Link Thu Jan 20, 2011
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