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Most
mortgage lenders claim to have the "lowest rates," but
what about their fees?
Our Pledge - at cmlender.com there’s only one fee we charge at closing,
($300) for our costs to administer the loan.
The only other fees on your loan are ones that actually get paid
out to other service suppliers such as the title insurance
company, the appraiser, the loan closing agent, and the credit
reporting company. That's why we
always encourage you to get a WRITTEN Good Faith Estimate
and a Truth In Lending disclosure showing what your Total Costs
are rather then simply relying on the rate or APR. And of course
if you have a "NO Closing Cost Loan" all these fees are waived.
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I have been
warned to watch out for junk fees. What are they, and how
much might they cost me?"
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Junk fees
or “garbage
fees” on real estate loans are usually lender charges that
are not standard out-of-pocket fees. Standard
out-of-pocket fees charged to you by a lender will
possibly include an appraisal fee, a credit report fee, a
tax service contract fee, and maybe another charge for an
internal processing fee. That leaves the rest to
possibly be described as “junk fees,” some of the most
common of which could include:
affiliate consulting fee,
amortization fee,
underwriting fee, bank inspection fee,
lender's inspection fee, settlement fee, signup fee,
funding fee, lender's attorney fee, endorsement fee,
express mail fee, document preparation fee, notary fee,
messenger fee, photograph fee, assumption fee,
administrative fee, document review fee, and translation
fee.
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Junk
fees
supposedly reimburse the lender for specific expenses, but
of course their real purpose is to enhance the lender's
bottom line.
They can advertise
and quote a lower interest rate or fewer points, but not
mention all their miscellaneous fees.
Not that the lender doesn't have high costs in originating
a loan, but a single charge would be simpler for everyone.
Some lenders do charge a single fee but most do not
because they believe that they can extract more in total
from the borrower that way.
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The
sad fact is that while lenders advertise their interest
rates and points, the only ones who advertise the total of
their junk fees are those who don't charge any, of whom
there are very few. There is no place the consumer can go
to get information on total junk fees while shopping for a
loan except the lender, and getting it from the lender is
often like extracting a tooth.
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While lenders are not required to report their total junk
fees anywhere, under Federal Truth in Lending regulations
they must report a number called the
APR
("Annual Percentage Rate"). This is a measure of credit
cost to the borrower which takes account of the rate,
points and most but not all junk fees. [It does not
include application fees, or the cost of credit reports,
appraisals, and document preparation.] While the APR can
be a dangerous guide to the consumer,
(use the APR only if you believe you
will be in your house and not refinance 5 years or longer.
If your time horizon is shorter, ignore the APR and shop
by specifying the rate and requesting a complete
itemization of all the credit charges you will be required
to pay with that rate. With the rate fixed, the best deal
is the one carrying the lowest total fees).
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Using a bit of reverse engineering, just check the
advertised rates, points and APRs on 30-year fixed-rate
loans to calculate total junk fees, for each of lenders
who advertised in your local newspaper. You will see
charges anywhere between $100 and $5,000;with the vast
majority in the $1000 - $2000 range. Junk fees thus range
from the nominal to the ridiculous.
Total Points
and Fees on a 30Year $100,000 at Varying Interest
Rates and APRs
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Interest Rate
(Figures in the
table below represent the total Junk Fees paid on a
$100,000 loan)
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APR%
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6.25%
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6.375%
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6.50%
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6.625%
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6.75%
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6.875%
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7.00%
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7.125%
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7.25%
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6.30
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$526
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6.40
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1565
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$262
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6.50
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2587
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1297
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$0
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6.60
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3592
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2316
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1032
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6.70
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4581
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3318
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2047
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$770
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6.80
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5554
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4303
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3046
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1782
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$510
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6.90
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6511
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5273
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4029
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2777
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1519
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$254
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7.00
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7453
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6227
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4995
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3756
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2511
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1259
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7.10
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8380
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7167
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5947
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4720
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3487
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2247
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$1001
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7.20
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9292
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8091
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6883
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5669
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4448
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3220
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1987
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$747
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7.30
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10189
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9000
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7804
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6602
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5393
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4178
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2956
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1729
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$495
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7.40
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11072
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9895
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8711
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7520
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6323
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5120
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3911
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2695
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1474
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7.50
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11942
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10776
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9603
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8424
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7239
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6048
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4850
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3646
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2437
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7.60
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12797
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11643
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10481
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9314
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8140
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6960
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5774
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4583
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3385
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7.70
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13639
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12496
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11346
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10190
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9027
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7859
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6684
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5504
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4318
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7.80
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14468
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13336
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12197
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11052
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9901
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8743
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7580
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6411
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5236
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7.90
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15284
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14163
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13035
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11901
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10760
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9614
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8462
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7304
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6140
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8.00
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16088
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14977
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13860
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12736
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11607
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10471
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9330
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8183
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7031
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