TYPICAL COSTS TO OBTAIN A LOAN

There are a number of fees or costs involved in obtaining a loan, whether it is to purchase a new home or to refinance your existing home. The origination and discount fees are usually described as a percentage of the loan amount. Each one percentage point of the loan amount is sometimes referred to simply as a “point.” For example, two points on a $100,000 loan is equal to two percent of $100,000, or $2,000. Fees are often quoted as discount points plus origination fee points. For example, “1 + 1” means one origination point plus one discount point, or two points total.

Often fees vary among lenders, and it is important to shop around to determine which lenders offer competitive fees. If one lender’s fees appear to you to be very high, it may be in your best interest to have a discussion with another lender.

When comparing cost estimates from different lenders, it is vital that you know how to make a fair comparison between them. One easy way to compare their costs is to compare the annual percentage rate (APR) that each offers. The APR is a calculation of the annual cost of a loan that takes into consideration the points and other costs charged by each lender at loan closing for a specific loan program. Comparing the APRs offered by two different lenders for a specific loan program will give you the true cost associated with each lender for that loan program. You will find the APR calculation on the initial Truth in Lending disclosure.

Origination and discount fees are not only the fees that can be charged. Other fees and costs vary by program and by lender. Here is a list of some of the more common fees, some of which go to third parties who provide services related to your loan:

In addition, your lender may require you to pay to obtain mortgage insurance, hazard and flood insurance before closing and to deposit reserves for taxes and insurance at your loan closing.

The bottom line is that there are many costs typically associated with obtaining a loan. When meeting with a loan originator, be certain that you fully understand the Good Faith Estimate (GFE) and Truth in Lending (TIL) disclosures that you will receive. Your estimated fees and costs are disclosed up front. If you don’t understand the forms, please ask for an explanation at the time you receive it.


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