How to Avoid 'Junk' Mortgage Fees and Save Hundreds on Your Home

BOSTON (MainStreet) -- Homebuyers and refinancers can save potentially hundreds of dollars or more on their mortgages if they make sure their banks throw out "junk" fees.

"'Loan-application fee,' 'processing fee,' 'funding fee' -- lenders come up with so many names," says Polyana da Costa, senior mortgage analyst at Bankrate.com (RATE). "Every lender will charge you some fees for a mortgage, [but] if they charge you every type of fee you've ever heard of, it's time to look for another lender."

Lenders large and small sometimes pad a mortgage's closing costs with several small fees that cost a few hundred dollars or less each but can add big bucks to your total closing costs. In addition to those noted above, other questionable fees some banks charge include "email fees," "PDF fees," "document-printing fees," "document-preparation fees," "administrative fees" and the ever-popular "miscellaneous."

Some banks or mortgage brokers will even charge you twice for the same service -- assessing, say, an "origination fee" and a "broker fee" even though they're the same thing.

Worse, it's not always clear what -- if anything -- lenders really do to earn such fees.

Da Costa says the easiest way consumers can avoid junk charges is to simply make your lender or broker explain what any questionable expense covers.

"Ask what it's for," she says. "You don't have to pay for something that you don't understand."

If your lender won't drop a questionable fee outright, they might haggle on its price if you threaten to walk away -- even if you're already at the closing table.

"Few consumers realize that they're not obligated to sign things just because they're at a closing," da Costa says. "If you don't agree with certain charges, don't close."

Here are some other tips for getting the junk out of your mortgage's costs:

Scrutinize all paperwork
Every lender must by law give you a form called a "Good Faith Estimate" of closing costs within three days of taking your loan application. The bank must follow up with a "HUD-1" form of final costs at least 24 hours before your scheduled loan closing.

Lenders use standardized forms for the HUD-1 and Good Faith Estimate so it's easy to see which fees the lender is charging.

On the Good Faith Estimate, look at sections titled Our origination charge, Required services that we select and Required services that you can shop for.

On the HUD-1, look at items in the sections titled 800. Items Payable in Connection with Loan and 1100. Title Charges.

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