Understanding Fees in a Mortgage Loan

Annette Bui| Updated June 08, 2020 | Mortgage Programs 101

It can feel overwhelming trying to interpret the loan estimate when you are buying your first home or simply handling all the paperwork involved in a refinance. So it may be tempting to call around and shop to make sure you are getting the best deal. But in order to do that, the crucial part will be learning how to interpret your loan estimate and making sure you understand the details.

Part of the mortgage process is the estimates for the pay off to your old loan on a refinance to include your lender fees such as underwriting, lock in or processing/origination fees. This is shown on page 2 section A of the loan estimate. The most commonly checked part is going to be whether there is a discount cost to buy down your interest rate and get a reduced payment or a lender credit applied to your third party costs. Next, are the title fees to ensure there are no other unknown claims, mechanics or tax liens on the property chain of title. The title fees may be anywhere from $2-$2.50 per $1,000 on your loan amount. If it is a purchase loan, then there will be the owner's title insurance (paid by seller) and the lender's title insurance that is paid by the buyer. All these fees, details for taxes and insurance being paid to the correct parties will be handled by the escrow company that is often done under the same umbrella as the title company or attorney if your home is located in an attorney state.

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