Two kinds of charge
Third-party costs pay someone outside the transaction for work that has to happen — the appraisal, title, recording fees, and the taxes and insurance your escrow account collects.
Lender charges are different. They sit with the origination charges in Section A, and the company sets them:
A lender controls its own charges, so it can reduce them, cover them with a credit generated by the rate, or in some structures not charge them at all. Ask for the same loan with those fees and without them, and compare the rate you are quoted each way.
A fee is not automatically improper — work does get done. But a charge on a document you are signing deserves a plain answer about what it pays for.
Some third-party costs are still yours to shop
The Loan Estimate separates services you cannot shop for from services you can, and comes with a written list of providers. Title and settlement charges commonly sit in the second group, and the provider a lender suggests is a suggestion, not a requirement.1
Why where a cost sits can matter in April
If a cost is going to be paid, its form is not always neutral. Mortgage interest and discount points may be deductible on your federal income tax return if you itemize, subject to IRS limits and eligibility requirements. Points may be deductible in the year paid or over the loan term, depending on the transaction.2,3
A processing, underwriting or administration fee is a charge for a service. It does not receive that treatment. Two loans can cost the same at the closing table and not be worth the same afterward.
Sources
These references support the factual explanations above. Where this page states a preference rather than a fact, it says so — those are our editorial judgement, not a claim that any one channel always costs less.
Next
You should not be paying anyone yetThe law sets a floor. The standard worth holding is higher, and it costs you nothing.What “no closing cost” can meanNobody is working for free. The question is where the cost went.The whole argument, in one place
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