A mortgage opening fee is a commission charged by the lender in exchange for processing a loan. It typically ranges from 0.5% to 1% of the total loan amount. Third-party charges are the costs of services provided by parties other than your lender, such as the title company and appraiser. With some planning, you may be able to reduce or find more cost-effective alternatives for these fees.
For instance, you may need to pay a title search fee to the title company for searching the property records to ensure that no one else can claim the property. The best way to get an accurate estimate of your loan costs is after processing your mortgage application and receiving a detailed closing cost sheet from your lender. The lender's opening fee is part of their compensation for originating your loan, in other words, for finding you as a customer and processing your loan to completion. Additionally, there will be many other charges included in your closing costs, such as a credit report fee, a transfer fee, title insurance, a rate-setting fee, and a registration fee. You may find another lender who does not charge an opening fee and offers a low interest rate, but charges high processing and subscription fees.
If you decide to sign somewhere else, such as at home, you may be charged a fee for sending you a notary (a signer who can certify documents). If you see a fee that seems excessive or out of place to you, such as an application fee or a mortgage rate setting fee, you should pressure your lender for more details. However, if you live in an expensive area, you should expect to pay more than average when closing your loan. Even if there's a good chance that you'll end up paying many fees from lenders, you might be able to save money in other areas. While all of these lenders used a fixed fee for origination, other lenders sometimes set this fee at 1% of the total loan amount.
Closing costs cover various fees related to processing a mortgage or required prepaid expenses, such as home insurance and property taxes. These include the opening fee and the cost of the discount points required in the mortgage rate, which decreases depending on the number of points you purchase. To learn more about the homebuying process, check out these helpful guides on the best mortgage lenders for giant loans and how to get your finances in order before applying for a mortgage. While that may not seem like much money compared to the amount you're paying up front as a down payment, these fees can be significant when you're buying a home with a smaller budget.
