Most lenders and mortgage brokers charge borrowers a fee for making a loan. These loan origination fees vary, but usually cover the cost of services such as processing your loan application and underwriting the loan. When added to your closing costs, origination fees can add another $2,000 to $3,000 to the balance due. However, you may be able to negotiate with a lender to waive the fee and lower your loan costs.
Shopping for the best loan deal involves more than getting a lower interest rate -- it helps to know all the fees and costs associated with getting a loan. Therefore, get offers from at least two or three lenders. Not only will multiple offers give you something to compare, they also put you at an advantage in getting different lenders to compete for your business. Generally, lenders are willing to modify the loan packages they offer, but you need to be clear on what you want. If one lender offers to waive the origination fee to reduce closing costs, let other lenders know what you can get somewhere else.
Many lender fees, including loan origination fees, are negotiable. Get an estimate of the loan fees up front and ask the lender for an explanation of any fees you do not understand. For example, origination fees may include several costs collected as one fee. Once you know what you are paying for, you are in a better position to negotiate.
Use Your Customer Loyalty
Banks and credit unions often are willing to waive lender fees, especially if you've been a long-time customer and they want to keep your business. Banks like customers who open multiple accounts since they tend to be the most profitable. If you don't get what you want, tell your current bank that you are considering taking your accounts elsewhere.
Take a No-Closing-Costs Loan
A no-closing-costs loan can save you paying upfront fees when you take out a loan, although you likely will have to pay a higher interest rate as a result. If you plan on living in the home for more than five years, a no-closing-costs loan isn't likely to pay off, because the interest on the loan will cost you more than the closing costs. On the other hand, if you plan on living in the home for fewer than five years, paying a higher interest rate during that time may actually cost you less.