3 Costly Mortgage Fees

Mortgage lenders require you to pay for a title-insurance policy that will protect them from legal challenges to your ownership of the property. The title insurer not only provides the policy but also generally arranges for a title search and designates a closing agent to handle settlement.

Most states set the premium that title insurers may charge for a policy in that state. However, the insurers have discretion to charge what they like for their services. Before you sign up for a lender or title company affiliated with real estate agents or loan officers, which will pay them a referral fee, check out the competition. You can cut the $2,000 to $3,000 cost by hundreds of dollars by shopping for a title service on your own. What you’re really looking for is the lowest cost for all the things that the title insurer provides.

Ask for quotes from www.entitledirect.com, a title insurer that sells directly to consumers in 39 states, and www.titleinsurance.com, which represents six of the major title-insurance underwriters in 38 states. Also compare costs at a local title-insurance agency that’s not affiliated with a real estate brokerage or lender.

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Lender’s origination fee. Also called an underwriting, administrative or processing fee, it can run you an additional $2,000 to $3,000. Lenders must give you an estimate of it and other closing costs within three days of receiving your loan application. Compare origination fees from several lenders, but exclude fees the lender doesn’t control, such as payments for settlement services, taxes and escrowed funds. (A new loan-estimate form due out in July from the Consumer Financial Protection Bureau should make the comparison easier.)

ABC fee. Real estate brokerage companies often charge both buyers and sellers this fee, which may be called an administrative brokerage commission, transaction fee, administrative fee, regulatory fee or compliance fee. It typically costs each party $100 to $300. Agents should disclose this fee upfront. Ask them to strike it from the seller’s listing agreement or the buyer’s representation agreement. If an agent refuses, hire another agent.