How to Avoid Mortgage Junk Fees
So, you've taken an application with a mortgage broker. He has told you your monthly payment and the total amount you will need at the time of closing. How do you know the charges on the loan are fair? How do you compare this loan to others you have been offered?
Check the GFE.
The Good Faith Estimate (GFE) can be your weapon to get the fairest price for your loan. If you don’t take a good long look at this infinitely important legal-sized piece of paper, you may just be throwing your money away.
This single document will detail every specific charge on your loan. Not only does it list your charges, it also itemizes them to show whom these charges are being paid to. Don’t just look at the dollar figures on this form. You should pay close attention to the party that collects those dollars. While the big number on the bottom is often scary, seeing all the people that came together to make this happen for you may make it all seem worthwhile.
You can use this breakdown to make sure that each party that collects a fee is being reasonable. You can compare apples-to-apples because all Good Faith Estimates must contain the same information. Also, make sure that what you have is a "Good Faith Estimate" and not just a summary of costs that the mortgage broker put together. They may leave some things out but the GFE keeps them in line because they are required by the government to disclose all fees to you.
Your realtor may also give you a fee summary. Do not trust this form. They do this to give you an idea about fees and costs but they don't have the information from the lender necessary to give an accurate quote. You can only get a Good Faith Estimate from a mortgage company.
Since all fees are disclosed in black and white on the GFE, this makes it a great tool to compare mortgages. More importantly, it makes it impossible for a dishonest mortgage broker to sneak unexplainable charges into your loan. A mortgage broker or bank is obligated to give you a GFE very soon after application. Take advantage of this to make sure you are comfortable with the fees being presented.
My best suggestion to you as a homebuyer is to hold on to the original signed copy of your GFE. This document can be easily compared to the final papers that you will sign at closing. You will notice any changes between these forms because they are set up very similarly. Keep in mind that the numbers will change, that’s the nature of an estimate, however your broker should be able to explain any noticeably large changes.