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I have read that mortgage brokers can still make money with no points and no origination. I thought they made money by selling my loan to someone else, usually at a lower rate then they are giving me. If this is so, then why would they charge againa and again (point, origination fees). This ia also stated in Dave Ramsey's book the total money make over. Please advise.
Points: Can mean two things. 1. "up front", usually called origination points (percentage of the loan 1 point=1%) or 2. "discount points". This is paid to the lender(mortgage holder) to buy down the rate. Each lender charges this differently but usually 1 point, or percent, buys down your rate by 0.25%.
The other way a broker/banker can get paid is from Yield Spread Premium. This is a percentage of the loan amount the lender pays the broker/banker.
But it raises you rate. Brokers HAVE to disclose this amount to you on a GFE, bankers do not by law.
No one will do a loan for free. You can either choose to pay the fee on the front end, bring cash to closing for those fees, or finance them into the loan by having the broker/banker get paid by the lender in Yield spread. Some folks decide it is better to split this, pay some of it, say half a point on the front and half a point in Yield spread. They don't "charge again and again" they can just break it up.
You will need to add up all fees minus the appraisal fees from the 800 lines.
A broker might charge a 'broker's fee', but a mortgage lender might call it administration fee.
The difference with the broker and lender is that a broker can negotiate the fees. If the fees belong to the brokers, he can easily negotiate it with you.
Quote:
Originally Posted by kim7878
Does the broker also charge a fee in addition to the other fees? Line 808.
Nope, Origination is the fee the loan officer splits with the mortgage broker/lender, 1% is great. If they aren't making a YSP on the back end too. Processng fees run anywhere from $450 to $1000 in this area OUCH....Tell your loan office to add all the junk fees into one Origination fee that is tax deductable. Tell him to figure it all out in his office. BE FIRM ALSO ask him to disclose how much he is making on the back end too ( ysp) aka yield spread
Quote:
Originally Posted by Korillian
Okay, so I just got my GFE back from my lender. There is a 1% loan origination fee, as expected. But there is also a processing fee of $699.00 and a settlement/closing fee of $225.00. That seems a little excessive to me. I remember reading somewhere, I thought on this board, that there are 'junk fees' often included in mortgage processing.
So, here is my question: what is the loan origination fee? Should the costs of processing my loan and closing on my loan be included in that?
Those fees seem to be normal and fair to me. Actually, the settlement fee is very low. I work for a broker as a processor, and we charge $500-750 for processing (depending on the type of loan) and settlement costs, which are paid to the Title Company and not the lender or the broker, run around $600.
What you have to remember is this - the origination fee is paid to the broker who then pays the loan officer. This is for finding you the loan. And the processing fee is for paying the processor for the paperwork. The settlement part of the process involves a whole other company, with staff THEY need to pay. There are countless man hours and supplies involved in the processing of a loan. Everyone who works has to get paid!
Under title charges (1100) the following are listed:
Settlement or closings cost 2000
Owners title insurance 2000
Lenders title insurance 1500
Is this reasonable for illinois?
Almost devoid of information really. As for the Owners title insurance that is optional coverage, though you should get it, that protects your money in the investment. If you have a large down payment then you absolutely need this coverage. If you are doing a VA at 0 down or FHA at 3.5% down then you can likely skip the coverage because the lenders policy (mandatory and 1500 is reasonable) covers the major concerns. Looks like your total out of pocket is only 2000 plus whatever your earnest money was so you don't seem to have put much money in and could do without the owners policy, I don't recommend this it is just an option if you are early enough in the process. You likely already made an election to add this coverage with your title company and it may be too late to have it removed but you can ask them.
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Broker Fees
