I have one of those great money-saving stories I love to read about on other blogs (like this one from CFO) and hear about from friends. And for anyone who will ever take out a mortgage, it may very well save you a good deal of money.
We’re selling our current house and buying another one in a different state. For us, for right now, that still means a mortgage. This will be a smaller mortgage, to be sure, and that’s part of the reason we’re moving – lower cost of living. At any rate, we’re in the process of doing all the mortgage-related paperwork.
If you’ve never taken out a mortgage or if it’s been a long time since you have, you may not be familiar with what’s called a Good Faith Estimate (GFE). The GFE basically itemizes all your expenses for the mortgage. Don’t ignore or skim over the GFE. It tells you what the mortgage company and others are charging you. On major purchases like this, where you’re talking hundreds of thousands of dollars, people tend to overlook a fee here they don’t understand and a charge there that wasn’t explained.
Don’t be that person. If you save $100 here, it’s the same amount of money as if you’d saved $100 at the grocery store. If you could save a $100 on a computer, you’d do it, right?
Anyway, I was reviewing our GFE like any smart person would do and I highlighted three items right away:
- Origination fee: $1250 (1% of the loan amount)
- Application fee: $300
- Underwriting fee: $325
I called the mortgage company contact person to get an explanation of these fees.
Me: “Could you explain why I’m being charged an application fee?”
Mortgage officer (MO): “It’s a standard fee.”
Me: “Ok, but why am I being charged for applying for a mortgage?”
MO: “It includes the appraisal and credit report fees.”
[Back story: We’re buying a new house at a price that requires us to use the builder’s lender. In other words, at a high level they’re really the same company.]
Me: “But why do you need an appraisal of a new house your company is selling me?”
MO: “It’s required to disburse the loan.”
Me: “Ok. Now what’s an ‘underwriting fee?’”
MO: “It’s the cost we pay to the underwriter to process the loan.”
Me: “So you’re passing your cost of doing business on to me.”
MO: “I guess you could look at it that way.”
Me: “There’s a $1,250 origination fee listed. I don’t want to pay that. Can you have it removed?”
MO: [several seconds of silence] “No one’s ever asked that before.”
Me: “Well I’m asking now.”
MO: “I’d have to talk to my manager and see what we can do.”
Normally that’s the kiss of death. ‘Talk to my manager’ is salesperson code for put you on hold or leave the room, pretend to consult someone, and return to say ‘No way.’ Even if the person you’re dealing with actuallydoes talk to his or her manager, the answer is usually no for the simple fact that the manager doesn’t have to say it to your face.
In this case, things worked out quite differently. The next day when I spoke to the mortgage person, she told me that she had, in fact, gotten permission to remove the origination fee.
I got three takeaways from this experience:
- Always go over every document in a situation like this, especially a GFE.
- Ask questions about fees you don’t understand.
- Ask again to have them removed.
Simply asking the question saved us $1,250. And, to me, that’s real money.