Below is a list of some of the fees you may encounter when purchasing or refinancing a home mortgage loan from Lower. This list is not comprehensive but does help provide you with a guide and hopefully will assist you in understanding some of the costs associated with your loan. We at Lower encourage you to ask your Mortgage Loan Originator questions about the details of your loan and the fees you may incur.
Once you have submitted a loan application with Lower, you will be provided with a Loan Estimate. Read this Loan Estimate closely as it will provide you with useful information, to include your estimated settlement costs. Our goal is to provide you with the best customer experience possible. To accomplish that goal we want you to be well informed!
If permitted by state law, the Application fee is a non-interest, loan-related fee, paid to and retained by Lower. The fee is assessed to cover Lower’s bona fide and reasonable administrative and transactional costs for the origination services of your loan. When charged, this fee will only be collected and paid when your loan closes.
Generally, Lower will require a valuation to determine the market value of the subject property. When required, the value of the subject property is used to calculate the loan amount as a percentage of the property value or loan-to-value ratio. The loan-to-value ratio is one of the factors used to make a credit decision on your mortgage loan application. The fee amount will never be more than the amount charged by the appraisal management company (AMC).
Nearly all loans require Lower to obtain your credit report. The credit report provides a FICO score, liabilities and other information that will assist Lower in underwriting and making a credit decision on your application. The Credit Report fee is a fee paid by you, through Lower, to a credit report provider. The fee amount will never be more than the amount charged by the credit report provider.
A common way to reduce your interest rate is to pay discount point(s). Each loan’s interest rate a lender offers may come with either a credit or cost. Depending on the availability, you could choose to lower your interest rate by paying the cost associated with that rate reduction.
- The 4.25% rate comes with a $500 credit (Money given to you to assist with closing costs); or
- The 4.0% rate, which does not have a credit but actually costs you $400 in order to obtain the reduced interest rate(Points).
Escrow Deposit for Property Taxes
Most mortgage loans (1st lien) require that you establish an escrow account at the time the loan closes. The monies you place into the escrow account are held by the lender or loan servicer and are used to pay property taxes, hazard insurance (including flood insurance if required) and other future obligations. By putting the monies into the escrow account with each loan payment, you help ensure that when a tax or insurance payment becomes due, there are sufficient monies in the account to pay the item.
The initial amount placed into the escrow account, as well as the monthly payment amount, is established at the time of loan closing and is based on when items are required to be paid. Further, the amounts are limited by the Real Estate Settlement Procedures Act (RESPA).
Every home in the United States is either in a flood zone or not. The determination if the property is located in a flood zone is provided by a report based on FEMA maps. Lower must determine that your home is not in a flood zone, and if it is, that flood insurance is available. Lower will not lend on a home that is in a flood zone unless it has flood insurance as required by law. Flood insurance will also help protect you in the event of a covered flood. The fee amount will never be more than the amount charged by the flood hazard determination provider.
Homeowner (“Hazard” or “HOI”) Insurance
Homeowners insurance is required to cover possible damages to your home. In the event of a fire or other damage, the hazard insurance is to cover the costs of rebuilding the home. Your first year’s insurance is often paid at closing.
Depending on your property’s location, some areas always require a pest inspection. Most areas will only require an inspection if there is evidence of a pest infestation noted on your appraisal.
If permitted by state law, the Processing fee is a charge retained by Lower for the cost associated with the processing of your application. Processing includes the costs associated with gathering and reviewing all the documents necessary to originate your loan. When charged, this fee will only be collected and paid if your loan closes.
A recording fee is a settlement cost that is charged by a local government agency in order to record the documents that evidence your purchase and/or loan. The fees are usually determined at the local recording office in the city or county where the property is located and can vary significantly based on the jurisdiction/state.
This is a fee paid by you directly to a survey company for the cost of a survey of the property. The survey is used to verify your property limits and lines. A survey of the property may be required to verify boundary lines for your property and to ensure that there is no encroachment on the lot. Occasionally, the title company may require a survey. While a survey is usually not required by Lower to obtain the mortgage loan, we do recommend you obtain a survey and review it with the title company prior to loan closing. The survey will help ensure you are getting the property you believe you are buying.
Title Company Title Search or Exam Fee
When you purchase a property, or refinance that property, Lower will require that a title company perform a search of property’s records. The search and review of such records will ensure no other entity or person maintains a claim to the subject property. The fee associated with this search and examination is paid directly to the title company or examination firm.
Many states/jurisdictions charge a fee or tax when a property is sold from one person to another. The amount of the fee is set either at the state or local level and is paid at the time the property is transferred.
If permitted by state law, the Underwriting fee covers the cost of researching and reviewing your application and whether to issue an approval. When charged, this fee will only be collected and paid if your loan closes.