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Know the Numbers

Credit Report

Typically, it costs under $50 to check your credit. With your permission the lender will order a review of your outstanding loans and your repayment history from a third party credit agency.

Application / Processing Fee

This cost, typically a few hundred dollars, is charged to cover the lender’s work to evaluate your ability to repay the loan. Some lenders will credit this back to you upon closing.

What is APR?

The APR, or annual percentage rate, is the sum total of all your borrowing costs expressed as a percentage interest rate charged on the loan balance.

For example: After fees, the original interest rate quote of 5.875% might work out to a 6% APR loan, where the interest costs about $6,000 per year for every $100,000 borrowed, and the principal payments are calculated based on the length of the loan term (for example 15, 20, or 30 years).

Indexes

The interest rates on variable loans readjust periodically based on changes in an index. Typical indexes include the Federal Funds Rate, Treasury Bill.

Points

When mortgage companies are competing by offering lower interest rates, they may charge you a one-time pre-paid interest payment calculated as a percentage of the loan. Called points", this may range from 0.25% to 2% of the loan balance, and is usually paid up front. Points are tax-deductible; consult with your tax advisor.

Appraisal Cost

Lenders hire experienced, often independent appraisers to evaluate the property’s purchase price, condition and size compared to similar recent neighborhood sales. This helps ensure the purchase price is not too high, and gives the lender more confidence in getting repaid in the event they are forced to sell the property if the borrower defaults. The appraisal costs vary depending on the property, type of appraisal, and region.

Miscellaneous Fees

Expect to see various charges incurred in the processing of your loan which might include notary, courier, and county recording fees.

Prepayment Penalties

These vary widely, so be sure you know in advance if your lender will charge a penalty if you refinance or sell, and the certain period during which the penalties apply.

© 2024 Berkshire Hathaway HomeServices California Properties (BHHSCP) is a member of the franchise system of BHH Affiliates LLC. BHHS and the BHHS symbol are registered service marks of Columbia Insurance Company, a Berkshire Hathaway affiliate. BHH Affiliates LLC and BHHSCP do not guarantee accuracy of all data including measurements, conditions, and features of property. Information is obtained from various sources and will not be verified by broker or MLS. Buyer is advised to independently verify the accuracy of that information.