My New Blog

4 Costly Refinancing Fees to Watch Out For:

1. Processing fees

Whether they’re called administrative, application, underwriting or processing charges, these fees are on the rise as lenders compensate for the lower-rate loans that they offer to be competitive. A lender may offer a borrower a $140,000 loan at an attractive 4.875% and no points, for example, but slip in a $350 underwriting fee and a $350 processing fee -- in addition to their regular application fee, Ruzicka says. While charging an application fee of several hundred dollars is normal, adding several other charges for the same amount of work is not. Be sure to compare several lenders’ fees -- and question anything that seems redundant.

Make sure you use a RELIABLE LENDER, get referrals from me (The Momentum Group, Friends and people you can trust).

2. Fannie and Freddie’s cut

On April 1, Fannie Mae and Freddie Mac yet again increased fees for loans they purchase or insure. Depending on the borrower’s credit score and the size of the loan relative to the home’s value, these so-called loan-level price adjustments can range from 0.25% to 3.5% of the loan. Another 0.25% to 3.5% is added for cash-out refinancing (when a borrower refinances with a loan that's bigger than what they owe on their existing loan -- so they have some cash left over).

Remember FHA 3.5% loan cost!

For someone in the 660 to 679 credit score range, a 30-year fixed-rate mortgage that is 85% of the home’s value would incur 2.5% in fees. (Prior to April 1, that same loan would have cost 1.75%.) And if the borrower took cash out, another 2.5% would be added for a total of 5%.

To figure out if you'll be hit with these charges, ask your lender or mortgage broker if your loan will be sold to or insured by Fannie or Freddie. Today, that’s the case for 56% of all outstanding mortgages.

3. Appraisal fees

Thanks to the Home Valuation Code of Conduct -- a set of regulations on property appraisals that goes into effect May 1 -- lenders who deliver loans to Fannie Mae and Freddie Mac will be prohibited from selecting or communicating with appraisers. This may cause them to collect appraisal fees upfront no matter if the loan goes through or not, says Smith.

YES upfront Appraisal Fees, BUYER needs to be aware and save up at least $450.00 for your appraisal and $400.00 for your home inspection.

Good rule of tumb: Have $1,000 set aside for the buying process and another $1,000 set aside for your Earnest Money, if you don't know what Earnest Money is email me at joanahoover@remax.net and I will explain.

If a borrower wants to refinance a home they think is worth $300,000, for example, but an appraiser values it at $200,000 and the loan can’t go through, the appraiser will still have to be paid. “I’ve never collected appraisal fees upfront, but I’ll have to start doing it,” Smith says. “I can’t afford to risk $400 every time I talk to someone about a refinance or purchase.”

Appraisers are also being required to use a new form that they estimate will add 45 minutes to the time it takes to complete an appraisal. “We charge by the hour, so it will drive up costs,” says Brad Charnas, an appraiser in Cleveland.

Cost may be on the up to around $550.00, so be prepared!

4. Private Mortgage Insurance

As mortgage insurance companies move to so-called “risk-based pricing,” private mortgage insurance, or PMI, which is required of anyone purchasing or refinancing a home with less than 20% equity, is getting more expensive for borrowers with lower credit scores, says Tom Taggard, a spokesman for PMI, a San Francisco-based mortgage insurer. Someone buying a $200,000 home with 10% down, for example, would pay $1000 a year in PMI if they had a 700 or higher FICO score, but if their score was 680, they'd pay $1,162 a year.

If you have any questions please feel free to call me at 360-362-2700. Also you may check www.kitsapmomentum.com/elitegroup  for my lender recommendations and all my business resources.

I hope everyone enjoyed a safe Easter!

Joana Hoover