Underwriting Fee
An underwriting fee on a mortgage is charged by the lender who underwrites or approves your loan. Pretty simple right? But because it can be one of the largest fees on your Good Faith Estimate and HUD1 closing statement, it freaks people out.
Some lenders break out their underwriting fee and other fees like doc prep or wire fee.
Note: Read Our Top Five Mortgage Complaints!
Doc prep is printing off the massive amount of papers making up your loan file. The wire fee is the fee for wiring the funds to the title company at closing.
Other lenders may lump all the fees mentioned above into one and call it an administration or admin fee.
Underwriting Fee Junk?
It is absolutely not junk. There is an actual human being doing an extremely hard job on the other end of that fee. And you probably notice it more on a refinance since you may roll the costs into your new loan.
It does not go directly to the actual human underwriter but to the company that pays their salary. The cost can be anywhere between $500 to $1000 depending on what is included.
Some may charge a $600 underwriting fee and in addition to that a $250 doc prep fee. Or, they may lump them together into an $850 admin fee.
Underwriters take some heat for killing deals but they are in the middle between you and your loan officer and the investor. You and your loan officer want the loan to be approved and the final investor has its rules, guidelines, etc. for the underwriter to uphold.
I hear people calling not only this fee junk but all kinds of other ones junk too (like the processing fee…for more info on that click the link
This just tells me they probably have never originated a mortgage or been involved at all in the process of closing a loan other than to be the borrower.
They think pretty much every cost on the GFE or HUD are all junk and can be negotiated away. Which brings me to my next topic…
Can you negotiate it away?
Of course all those other people would say yes! Get in there and show them who is boss. This is a little funny (ok a lot) to me.
Because they have probably never been an insider in the mortgage business, they don't understand what happens when you “negotiate away” something.
The loan officer is just going to increase your rate to cover the cost of that fee.
They might shine you on and pretend they’re doing you a huge favor. But you end up paying for it in the rate.
Underwriting Fee VS. Admin Fee
When a lender calls the underwriting fee an admin fee, that just means they are grouping more than one fee together. If they added the doc prep to the underwriting fee, technically it is not underwriting anymore. To make things easier, they group fees together and call it admin.
If you use a broker, it goes to the wholesale lender they used. The wholesale lender will be the one underwriting the loan. Be careful if you see an admin or underwriting fee going to the broker and not the wholesale lender. That I would question.
If you use a big mortgage company or bank, they underwrite their own mortgages in house. It goes to them because they employ the underwriters.
Even though there is automated mortgage underwriting rendering the initial decision, it is the human underwriter that has the tedious job of checking every last piece of paper in your file for accuracy. To learn more about automated underwriting click here.
Have you looked at all the documents that go into your mortgage file by the time it makes it to the underwriter?
Then, putting his or her name (with their job on the line) on that file showing Fannie, Freddie, etc that they can insure this loan.
It's a tough job, but somebody's got to do it. And they deserve to get paid.
And yes, the lender who collects the fee has some profit above what they pay the human underwriter but they have overhead. They pay for office space to house all the staff, pay salaries, provide health insurance, etc.
Without a human being’s stamp of approval, your mortgage wouldn't go anywhere.
Good Luck!
Terri
Note: Read Our Top Five Mortgage Reviews!
Get a mortgage rates quote from 4 lenders Free...Click Here!
Author: Terri Ewing
Previous Post: « Processing Fee
Next Post: » Co Signing a Mortgage
