I have been doing loans for 30 years and I have never asked for an "application fee" I have asked for deposit for credit and appraisal. While it seems to be rare, it's that kind of nonsense that gives all of us a bad reputation.

Run, don't walk, to another lender/broker. In spite of what your situation might be, the most you should be asked to pay for initially, is the cost of a credit report (about $20.00) I do not order an appraisal until I have reviewed the credit and income to see if it's a viable loan.

It always pays to shop, even if you have a tough loan.  you could save the $600. buy spending 3 or 4 hours looking for a better lender. Is your time worth $150. an hour?

Good luck and give me an update.

JR

John Robson:

Run, don't walk, to another lender/broker. In spite of what your situation might be, the most you should be asked to pay for initially, is the cost of a credit report (about $20.00) I do not order an appraisal until I have reviewed the credit and income to see if it's a viable loan.

Let's paint a clear picture here - Application fees are part of the process.  Is $600 reasonable???  I don't think so...

Most banks will charge $50-$200 for an application fee...brokers are a whole different ball game...most that I know do not charge an application fee...but application fees do exist and are more than $20...

(and if you think about it, if you are asking someone to lend you $200,000, then a $200 application fee (committment) is not asking much)

An application fee is often used as a tool to measure your commitment.  If a broker/lender feels that they have ample business, the application fee will deter less committed customers from applying. This frees up their time to work on deals with a higher probability of closing.

$600 seems quite high to me.  Normally, if an application fee is being asked for, it is enough to cover the appraisal and credit report.

I would agree with most of the prior postings.  $600 is out of the ballbark.     $25-$75 is reasonable.  I guess the real question is why has it taken a few years for you to obtain a mortgage. 

Please advise of your personal circumstances so we can provide a more accuate direction.

Larry Scherer

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I have to disagree with my colleagues a little here . . .

What does that fee cover? I don't charge a fee personally, but I used to work in "big name bank" retail, and it was policy at most to charge between $295-$895, depending on the value of the house (costs more to appraise a multi-million dollar property), before so much as a preapproval would be granted. If a loan hit the system (happens when credit is pulled and application is taken) and the customer had not paid the fee, the entire fee was deducted from the loan officer's paycheck.

Additionally, I worked once at a shop that charged an application fee of about $500. That fee covered the cost of an appraisal (which was most of it, 350-475 in my area) and a credit pull and other inceidental processing costs. It was company policy that if the customer withdrew or was denied, every dollar that was NOT used to pay outside providers already, such as the appraiser and the credit report company, would be refunded to the customer. When the loan closed, any unused fee was applied directly to the closing costs. The shop had VERY low fees beyond the application fee, because the high level of commitment from borrowers kept overhead costs well below the competitors. In the end, this usually worked really well for both parties.

While it is true that that some brokers collecting that fee may be simply padding their pockets, some may be legitimately assessing your commitment to the process and trying to avoid being stuck holding the bag.

In retail banking, an application fee is standard nowadays. Every big national bank I can think of charges one at some point in the transaction (thoug it may not be until closing, if the loan officer thinks you are a good risk), and the lowest I've heard is $295.

Get a full "good faith estimate" of all costs, and a detailed explanation of exaclty where that $600 is going. It may be a scam, but it may also just be a sign of the times. Money is not flying around the mortgage world like it used to be, and some mortgage brokers and lenders have steep overhead costs and experience high fallout from borrowers who just want to apply all over town, get a few free appraisals, underwrites, and credit reports (cost to each lender about $400), and then make their decision.

If the over-all costs are lower than the competitors, the application fee should not be a turn off unless you think that for some reason you will not qualify for the loan when all is said and done.

But if the broker/lender cannot tell you EXACTLY what the application fee will be spent on . . . run, run for your life.

I agree with a former post on this thread: Why has it taken several years?  I am sure that there are circumstances that have posed an issue, but if you have a lender that is willing and able to help - the "and able" part is most important!!- then you have to ask yourself if it is worth the risk of losing $600.  Is the application fee refundable to you if they are not able to perform?  Have they listed out all the terms in detail or is it a case of "We will only send out a Letter of Commitment when we get your money"??  There are plenty of companies that charge upfront fees like this, especially if it is a hard to place loan.  Depending on the loan amount and the type of property, the upfront costs can be for "due diligence" as well.  I would definitely get details regarding what the application fee covers, and what your recourse is should the loan not fund.

Best of luck to you, hope this helps!!

if anyone charges you money up front, run.  Especially if they call it an application fee cause that way if you dont qualify, they dont have to refund you any money.  The only money you should pay up front is for your appraisal which you can pay at the door directly to the appraiser.  Other then that, i would advise anyone to run, call another broker if who you are working with is asking for money up front.

Ethan Brizzi:

I agree with a former post on this thread: Why has it taken several years?  I am sure that there are circumstances that have posed an issue, but if you have a lender that is willing and able to help - the "and able" part is most important!!- then you have to ask yourself if it is worth the risk of losing $600.  Is the application fee refundable to you if they are not able to perform?  Have they listed out all the terms in detail or is it a case of "We will only send out a Letter of Commitment when we get your money"??  There are plenty of companies that charge upfront fees like this, especially if it is a hard to place loan.  Depending on the loan amount and the type of property, the upfront costs can be for "due diligence" as well.  I would definitely get details regarding what the application fee covers, and what your recourse is should the loan not fund.

 

Best of luck to you, hope this helps!!

Where'd that post go?

Did you ask what the application fee covers. I'm a mortgage banker and we collect a $350 application fee once the borrower has been approved and commits to working with us. This fee covers the appraisal and credit report and I let all my clients know that upfront. I have the ability to waive the $350 but the few times I have for borrowers they have walked from the loan and stuck me with paying the $350. 

Keep in mind however that some portfolio niche lenders will charge an application fee to lock in a rate. For example, if your loan is a super jumbo loan, a portfolio lender that we work with has a mandatory $500 application fee due within 5 days of locking in the rate. Their rates for these loans are unmatched and they do some other outside the box things with their loans so they can charge this fee.

I think we need to know more details to your specific loan to advise you properly on what to do.

Best of luck

Does that include an appraisal?

As you can see where you go and what answer you get is going to very. You need to use your gut and go with it.  If you feel the lender your working with is being upfront and the fee is used as a credit for the appraisal and credit report when you move forward it's not unreasonable.  What I would watch out for is that if your home doesn't appraise for enough value you lose that $600 fee.  In our area (Colorado Springs, CO) value is a huge issue when refinancing. Ask for a value check (called a comp check) before moving forward.