Pay a reasonable loan origination fee
Before you agree to take out a mortgage loan, make sure that know what your loan origination fee will be.
Within three days of receiving your mortgage application, lenders are required to send you a good faith estimate (GFE), which should recap all of the loan's key terms, including your interest rate, closing costs and other expenses.
While federal law dictates the information every GFE must include, it doesn't require lenders to use a standardized form that makes that information simple to find and compare.
As a result, every lender has its own form, some of which are pretty easy to follow and understand. Some are not.
Most GFEs include numbered lines that correspond to the government-mandated lines on the settlement statement you're given during closing.
Line 801 is where you'll usually find the loan origination fee, which covers the lender's administrative costs for processing your loan.
Origination fees typically range from 0.5% to 2% of the loan amount.
If you're borrowing $200,000, for example, that could be anywhere from $1,000 to $4,000.
For most borrowers, the best deal is a 30-year, fixed-rate mortgage that charges no points and origination fees that are on the low end of that range, usually 1% or less.
If you can't determine what the fee will be from your GFE, ask and confirm that it's listed. It's important to have every aspect of your loan agreement documented.
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