A junk fee is a fee that is charged to the borrower by the originator but serves no purpose other than to increase the revenue of the originator. Junk fees are not a percentage of the loan amount but rather a lump sum between $50 to $1,000 depending on the fee.
In regards to a real estate transaction, an escrow is when money is placed with a third party in an account until both parties execute the agreement. For a mortgage, escrows are money placed in an account so the taxes and insurance can be paid when they come due.
Closing costs are fees paid up front when obtaining a mortgage. These are fees like origination, appraisal, title, discount, recording, underwriting, processing, etc.
Closing costs are technically just the fees that go to the originator and any other third party like an appraiser or title company. However, there are other things that need to be paid at closing like days of interest and escrows that will be included in your “cash needed to close” number that technically aren’t closing costs.
Down payment assistance programs like The American Dream Down Payment Assistance are all but outlawed for use with any government insured loan programs.
It’s about damn time!
I can hear you now, “What’s wrong with charities helping home buyers by giving down payment assistance?”
In a word, it’s a scam…that’s why!
An origination fee is a fee paid to the company that originated your loan. Origination is the beginning of your loan. It is the service provided for qualifying you, finding the right loan product, and locking a rate.
Real estate closing costs can with certain limits be paid by the seller without detriment to the buyer if you know the rules. Ignorance of the rules can turn real estate closing costs into a Catch-22.
Why is this important?
It can be the difference between a loan approval and a loan denial.
Mortgage companies who advertise on radio and TV about “no closing costs” or “$395 flat fee” are simply lying.
I know for many of you hearing an untruthful advertisement is no great threat, but for the proverbial little old lady or an unsuspecting first time buyer it truly is. I think with 2 trillion dollars in adjustable loans set to adjust over the next 24 months, you got hoodwinked by false advertising more than we’d all care to admit.
No cost mortgage advertisers pound the air waves spewing this mortgage lie. The no cost mortgage is a scam requiring great salesmanship, some misdirection, and an unsophisticated client.
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