Should I be paying an origination fee?

[TNDemo]

We are signing mortgage papers. We are getting a mortgage for about 50% of the purchase price of the house. We have good credit. They are assessing a 1% origination fee. How negotiable is this?

[HarveyBriggs]

1. Have you shopped mortgages?

The origination fee is what the finance company makes for selling you the loan. The fee varies among institutions and how they handle the mortgages.

Thanks to federal standardization of mortgage paper from institutions like FNMA (Fanny Mae) mortgages are bought and sold as commercial paper. Some institutions simply sell you the mortgage, then sell the mortgage on the open market. You may end up with many different mortgage companies handling your mortgage. There is nothing wrong with that at all, but it can be annoying changing your payments and keeping up with it. And, from time to time somebody can mess up your escrow account. That doesn't happen often, but it does happen.

In looking at your mortgage, balance the rate and your fees and ask yourself how long you are planning on either keeping the home or keeping the mortgage. With interest rates as low as they are, and the government debt competing for loan money, it's more likely than not rates will increase, BUT folks have been saying that for over a year now and there have been only nominal changes in the rate.

The reason to balance fees with mortgage rates, is that some financial institutions may load up heavily on up-front fees but give you an outstanding rate. If you are going to keep the mortgage and the home for a long time, then it could be a good deal for you. But, if you move a lot, a low-fee loan -- and maybe even lower-rate adjustable rate loan may be your best bet.

Consult a financial advisor for more information.

I hope I helped a bit.

[loathesomeshrub]

2. 1% origination is very common. The less your mortgage amount, the

less the lender is making. You can pay less origination and more interest I believe. But in my experience, as a realtor, there is no chance of avoiding that origination fee as a rule. At least in Texas. In Oklahoma they didn't do it as much. If you have a realtor they can help with your questions.

[Wcross]

3. You can avoid the point if you accept a higher intrest rate.

Either way, you will pay for it. Pay up front or pay in intrest over time.

Did you find a new place? Congrats! Hope it all goes well for ya!

[TNDemo]

4. Yes, we found one.

We are selling out. We are moving to where we said we never would - one of those developments with a big house and a small lot. We have just been looking for so long with no luck and so little for sale. The kitchen and the screened in back porch sold me on this one. It's a small back yard but it's private. It would be the perfect house if it was on five acres but my husband always breaks into that song from Mad TV about Lowered Expectations - the dating service for the not quite desirable when we talk about the perfect place.

[Wcross]

5. Great!

I wish you many happy days in your new home! Just look at the positive aspects of a smaller lot- less mowing and weed eating!