How to Avoid Nasty Mortgage Junk Fees

So, you've completed an application with a mortgage broker. You've been informed of your monthly payment and the total amount needed at closing. But how do you know if the charges on the loan are fair? How do you compare this loan to others you've been offered?

Check the GFE.

The Good Faith Estimate (GFE) can be your key to getting the best price for your loan. If you don't take a careful look at this crucial document, you may end up wasting money.

The GFE details every specific charge on your loan. Not only does it list your charges, but it also itemizes them to show who these charges are being paid to. Don’t just glance at the dollar figures; pay close attention to the party collecting those dollars. While the total amount might be daunting, seeing all the people involved in the process may help you appreciate the overall effort.

You can use this breakdown to ensure each party collecting a fee is being reasonable. You can compare apples to apples because all Good Faith Estimates must contain the same information. Also, make sure you have an actual "Good Faith Estimate" and not just a summary of costs put together by the mortgage broker, which might leave out some details. The GFE, required by the government, ensures all fees are disclosed.

Your realtor might provide a fee summary, but don’t rely on this form. Realtors do this to give you an idea of fees and costs, but they don't have the lender's detailed information to provide an accurate quote. Only a mortgage company can give you a legitimate Good Faith Estimate.

Since all fees are disclosed in black and white on the GFE, it is an excellent tool for comparing mortgages. More importantly, it prevents a dishonest mortgage broker from sneaking in unexplainable charges. A mortgage broker or bank is required to provide you with a GFE shortly after the application. Use this to ensure you are comfortable with the fees being presented.

As a homebuyer, hold on to the original signed copy of your GFE. You can easily compare this document to the final papers you will sign at closing. You will notice any changes between these forms because they are set up similarly. Keep in mind that the numbers might change—that’s the nature of an estimate—but your broker should be able to explain any significant changes.