Understanding how mortgage origination fees can be confusing, but the team at Picatinny Federal Credit Union has helpful information to share to provide some clarity when it comes to understanding how these fees work.
What are mortgage origination fees?
Mortgage origination fees are charges a lender collects to process, underwrite, and create a mortgage loan. They’re the cost of doing the paperwork and administrative work needed to issue your loan.
Origination fees typically cover the costs of loan processing, underwriting and credit review, document preparation, and lender administrative needs.
How they’re charged can vary, but typically, these fees can be a percentage of the loan, a flat fee, or broken into line items like an underwriting or processing fee.
Origination fees can in fact be negotiated. Some lenders will reduce or waive them. Others may offset low fees with higher interest rates.
We’ve asked our Mortgage Loan Officer, Elaine Madsen, to walk us through the typical components of mortgage origination fees that borrowers encounter with traditional lenders.
Elaine’s response: “Typically, the fees for appraisal, credit report, flood certificates are charged separately. Many lenders add a point which is equal to 1% of the mortgage amount added to the origination fees. These fees can vary from lender to lender.”
We then asked Elaine, our mortgage expert, if she can recall a specific time or project, perhaps early in your career, where she saw how complex origination fees could really impact a borrower.
Elaine’s response: “Since the early 2000s lending laws have changed. In the early 2000s, you received a HUD-1 at the closing table, and you never saw the closing costs prior to the closing. In 2015 the rules changed which are called TRID-RESPA Integrated Disclosure (TRID) rules. The lender must provide you with a Closing Disclosure 3 days prior to closing for you to review, approve and sign.”
What is a flat fee mortgage?
A flat fee mortgage is a type of home loan where the lender charges one fixed, upfront fee to originate the loan instead of a fee that’s based on a percentage of the loan amount.
How it works is straightforward. You pay one set fee, and that fee stays the same regardless of the size of the loan. In fact, it replaces the traditional percentage-based origination fee.
Traditional mortgage fees and flat fee mortgage fees differ. For a traditional mortgage origination fee, it is usually 0.5%–1% of the loan. For flat fee mortgage origination fees, that is a fixed dollar amount.
We brought in our mortgage expert to explain some less obvious, long-term financial impacts borrowers might experience by choosing a flat-fee mortgage over a traditional one beyond the immediate savings.
Elaine’s response: “With a flat fee program, you know exactly what you are paying. Origination fees can range into the thousands. This additional cost could be used for savings in case of emergency or you can apply the extra money to principal once you receive your mortgage statement after closing.”
Why consider a flat fee mortgage?
Flat fee mortgages offer predictable costs, often cheaper for larger loans, they’re more transparent pricing, and overall, they’re easier to compare lenders.
Flat fee mortgages are best for buyers with larger loan amounts, borrowers who value transparent pricing, and people comparing online or fintech lenders.
What makes a flat fee mortgage from Picatinny FCU the best option?
At Picatinny Federal Credit Union, we designed our Flat Fee Mortgage Program to make buying a home more affordable and predictable for our members. Instead of charging percentage-based origination fees or stacking multiple lender charges like explained above, we offer a single $999 flat fee that covers many of the major costs typically billed separately by other lenders, including the application fee, credit report, flood certification, appraisal (up to $415), lender’s attorney review, and processing and underwriting. With many lenders charging well over $2,000 for these same fees, our flat fee approach helps eliminate surprise expenses, simplifies budgeting, and keeps more money in our members’ pockets at closing.
Here is a breakdown to show the Picatinny Federal Credit Union difference:
*PFCU will cover the fees above up to two borrowers for credit reports, up to $415 for appraisals.
*If there are up to two borrowers the MLO will disclose the additional amount for the credit report fee on the Loan Estimate.
How can I take advantage of Picatinny FCU’s Flat Fee Mortgage Program?
The first step is to become a member of Picatinny Federal Credit Union if you aren’t already. If you live, work, worship, or go to school in Morris, Essex, Somerset, and Union counties you are eligible to join our family of members. Visit us online, stop by your nearest branch, or give us a call to get started. Experience the credit union difference today!
