There is more and more talk about mortgage "junk fees" and quite a difference of opinion when it comes to determining which fees are junk fees.

Junk fees are excessive fees that a mortgage broker or lender may charge a borrower. Junk fees may consist of processing fees, administration fees, warehouse fees, credit review fees, appraisal review fees, and so on. It is simply a "nickel and dime" process that mortgage providers use to increase their bottom line. Now if these fees were charged individually and not collectively, they wouldn't necessarily be considered junk fees. Once they are combined on the same loan file, then they are looked at as junk fees.

There is a misconception that an underwriting fee is considered a junk fee. This is simply not true the majority of the time. An underwriting fee is a legitimate cost of doing business that the lender needs to recoup. The lender needs to employ an experienced, competent, and sometimes licensed individual to make a credit decision on every file. They need to pay this underwriter a salary to perform this service. This cost is above and beyond the actual overhead of running an office.

In order to avoid paying junk fees, make sure you receive a Good Faith Estimate within 3 business days of your completed application. If you have not received on, then request one from your mortgage professional. If at that point they are unwilling to provide one, then it may be in your best interest to work with another professional.

Once you receive a Good Faith Estimate, be sure to review it carefully. Ask your mortgage professional about fees that are questionable or that you don't understand. If the sheer number of mortgage related fees seems excessive, get a second opinion. Keep in mind that your mortgage professional doesn't necessarily have control over 3rd party fees such as an appraisal or title fees. They should be willing to shop around for competitive fees from other service providers.

 

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