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Origination Fee/Charge Commitment Letter Question

Commitment letter says on $224K conventional 3.75% origination charge is $4,585, or 2.05% of the loan. It also says mortgage broker fee is 1.75% of the loan amount, or $3,920. Aren't they one and the same? I thought a reasonable fee is 1%. These are the only fees stated. Also, appraisal separately will be $470. Any advice or thoughts would be appreciated.

  • June 19 2012 - New York
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Answers (9)

Best Answer

You are dealing with a broker, not a direct bank.   Most likely they are getting paid 1.75% of the loan amount from whoever they broker the loan to. Then that 2nd company is charging the extra .30% for the 3.75% rate or their underwriting fees.

1% was the resonable fee several years ago and represented how much the mortgage broker was charging the customer to do the loan. However, what the consumer did NOT know was how much additional money the mortgage broker was making from the company they took the loan to. It was quite common for the mortgage broker to be paid by BOTH the customer and the bank they brokered the loan to.

Several years ago, the government made this practice illegal. Now the mortgage broker can NOT charge you an origination fee and has to disclose to the customer how much they are making by brokering the loan to another company.

Please note: they rules only apply to BROKERS, not BANKERS.   You still would not know how much money a banker makes when they sell their loans on the secondary market.

Hope this helps! 
  • June 19 2012
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Profile picture for Go Huskers
What you have is A ok! Close it!
  • July 30 2012
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Following up on this. The rate now is 3.5%. GFE states:
A: Origination charge $4,585; Credit -$3,987 = Adjusted origination charges = $598.  
Am I only paying the $598? Seems like a good deal. 
  • July 30 2012
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Thanks, Brian. You're right...I knew I was missing something. Is it this? --> I found a doc with itemized "prepaid finance charges" that equal roughly $4K resulting in "amount financed" of $220K. I don't see that I have received a formal GFE.
  • June 19 2012
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Keep in mind lenders that the GFE will also show a lender credit to offset the 1.75% mortgage broker fee.  So I would not say that the fees are too high, we need more info. 

It's funny how many lenders come on here and answer the questions the exact same way everytime...

"you are getting screwed by this, call me I can do better."

Doesn't matter what the question is, the response is always the same.  
  • June 19 2012
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Profile picture for GMerino
Agree with Chris fees are to high. 
  • June 19 2012
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Forgot to mention this is a refi with the same lender through a broker Thanks for the replies!
  • June 19 2012
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Profile picture for Chris Corica
Those costs are way to high. Feel free to contact me through my profile for a no cost, no obligation fee/rate quote.
  • June 19 2012
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Profile picture for GMerino
Get a couple of Good Faith Estimates to compare. 
  • June 19 2012
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