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Credit Report: Typically,
it costs under $50 to check your credit.
With your permission the lender will
order a review of your outstanding
loans and your repayment history from
a third party credit agency.
Application / Processing
Fee: This cost, typically
a few hundred dollars, is charged
to cover the lender’s work to
evaluate your ability to repay the
loan. Some lenders will credit this
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, or 30
years).
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Indexes: The interest
rates on variable loans readjust periodically
based on changes in an index. Typical
indexes include the Federal Funds
Rate, 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
up front. Points are tax-deductible;
consult with your tax advisor.
Appraisal Cost:
Lenders hire experienced, often independent
appraisers to evaluate the property’s
purchase price, condition and size
compared to similar recent neighborhood
sales. This helps ensure the purchase
price is not too high, and gives the
lender more confidence in getting
repaid in the event they are forced
to sell the property if the borrower
defaults. The 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: These
vary widely, so be sure you know in
advance if your lender will charge
a penalty if you refinance or sell,
and the certain period during which
the penalties apply.
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