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The StarHarborRealty.com Indianapolis Real Estate Blog

Mortgage Advice

The most common real estate trap

Buying real estate is a complicated matter.  There is so much to consider when buying a house that it’s hard to keep track of it all.  Many buyers concentrate on the tangibles because that is what they can see and touch.  Unfortunately, it’s the things they don’t see that often hurt them in the end.  One of the most common pitfalls of buying a property has to do with the loan origination fees. 

While a good real estate broker will help educate you about the problems associated with loan origination fees, nothing can substitute for personal knowledge.  This is what every home buyer needs to know.  You will pay someone a fee anytime you take out a mortgage loan.  The amount you pay can vary widely depending upon the mortgage broker or person originating the loan.

One of the most common pitfalls real estate buyers fall into is the zero origination fee loan.  This is a popular option used by many mortgage brokers to bring business in the door.  Unsuspecting borrowers hear the pitch which informs them that they can opt for the bank paying the origination fees rather than they the buyers paying such fees.  When borrowers select that option, they can expect to pay nothing out of pocket at the start of the loan, but they will pay an extra fee with each mortgage payment over the life of the loan which will result in the loan origination fee being paid over and over every two years over the life of the loan.

To combat this predatory practice Congress passed the Real Estate Settlement Practices Act (RESPA), which requires mortgage brokers, banks and other institutions to disclose the actual amount of loan origination fees and other fees to the borrower so that the borrower can be better informed about the real costs associated with the loan.