Mortgage junk fees and how to push back

"Junk fees" isn't a legal term. People use it for charges that add little value or overlap with other fees, such as a processing fee, an administration fee or a document preparation fee on top of an origination charge. Some lenders roll their costs into one origination fee; others split the same costs into several lines.

Many fees pay for real work: the appraisal, the credit report, title insurance, government recording. So the useful question isn't whether a fee has an odd name. It's whether your total cost is higher than another lender would charge for the same loan.

• Section A, Origination Charges. Everything here goes to the lender or mortgage broker, so it's the most negotiable part of the estimate. After the Loan Estimate is issued, these charges generally can't go up without a valid reason, but they can always come down.
• Section B, Services You Cannot Shop For. Third-party services the lender picks, such as the appraisal. You can't choose the provider, but you can compare these totals across lenders and ask about anything that looks high.
• Section C, Services You Can Shop For. Title and settlement services, surveys and similar. You can get your own quotes.
• Section H, Other. Items the lender doesn't require. Make sure you know what each one is and that you want it.

New to the form? Our Loan Estimate guide walks through every section.

None of these is automatically improper. What matters is the total, and whether you can get the same loan for less.

A discount point costs 1% of your loan amount and lowers your interest rate. Points can make sense if you keep the loan long enough, but only if they actually buy a lower rate.

Ask each lender for its rate with no points. If an offer charges points but its rate is no lower than another lender's no-point rate, the points aren't buying you anything.

• Recording fees and transfer taxes in Section E. Government agencies set them.
• Prepaid interest, which depends on the day you close.
• Escrow deposits in Section G, which depend on your property tax and insurance bills.
• Homeowner's insurance premiums. The lender doesn't set them, but you can shop for a different insurer.

1. Get two or three Loan Estimates on the same day, for the same loan amount, term and loan type.
2. Compare the rate and the Section A total together, not the fee names.
3. Point to specific lines. Tell your preferred lender exactly which lines another offer beats, and by how much.
4. Get it in writing. Ask the lender to confirm any lower fees in writing.
5. Shop Section C yourself if the lender allows it.
6. Start early. Lenders have the most reason to compete before you've committed to one.

Use your own words, but keep it specific. For example:

• "Another lender quoted the same loan amount and rate with $1,100 less in origination charges. Can you remove the processing and administration fees, or match that total?"
• "What does the document preparation fee cover that the origination fee doesn't?"
• "What rate can you offer with no discount points?"
• "Can you confirm the lower fees in writing before I go ahead?"

Stick to facts from the Loan Estimates you have. A specific dollar comparison is harder to brush off than a general request for a discount.

Padded fees don't only show up while you shop. When your Closing Disclosure arrives, put it next to your Loan Estimate. A lender fee that wasn't on the Loan Estimate, or one that grew, generally isn't allowed unless the lender issued a revised Loan Estimate for a valid reason, such as a change you asked for.

If you spot one, ask the lender in writing what the fee is for and which revised estimate covers it. If there's no valid reason, ask them to remove it or credit it back before you sign. Our Closing Disclosure guide has a checklist, and the Closing Disclosure Audit compares the two documents against the federal limits for you.

A few hundred dollars in fees can matter less than a small difference in the rate over years of payments. Compare the total cost over the time you expect to keep the loan. The free mortgage payment calculator shows what a rate difference means each month, and our Estimate Compare report does the full comparison across 2 to 4 offers.

Once you've chosen, the lender's own charges generally can't rise before closing without a valid reason. Our TRID tolerance guide explains what can change.