Junk fees - Posted by Jeff

Posted by Jeff on June 30, 2002 at 21:34:49:

Ok, a few clarifications:

  1. Could you list a few fees that are commonly attached to financing that would be considered junk fees.

  2. So if I undestand you correctly, reserves are costs I would have incurred anyway?? Isn’t that what pre-paids are? What is the difference between a prepaid and a reserve payment then?


Junk fees - Posted by Jeff

Posted by Jeff on June 29, 2002 at 11:07:26:

I am currently shopping around for conventional loans for a rental property purchase. I recently got a good faith estimate from one particular lender that lists all kinds of fees that total pretty high, and I was just wondering if someone could elaborate what fees would be completely justified, and what fees would be considered ‘junk fees’.

Also, what is the difference between pre-paids and reserves, and why are reserves required?

One last, if I obtain and can prove I have Hazard Insurance, if I provide proof of coverage, can I get that knocked off the Prepaids and reserves?

All input welcome!!



Re: Junk fees - Posted by Ed Garcia

Posted by Ed Garcia on June 29, 2002 at 12:16:01:


Since you have not elaborated on any specific fees, my general answer is that Junk Fees are negotiable.

As far as any fire or hazardous insurances are concerned, lenders will plug the cost in because they require it, however if you already have your own, you may use yours.

All you have to do is tell the lender and that you will have them added on to your policy and that you have your own insurance.

Reserves are more of an outlay for your future costs, rather than a cost of the loan. Many times borrowers get confused as to what charges are costs that the borrower would have encountered anyway such as withheld property taxes, verses lenders cost of the loan.

On a refi, because interest on mortgages are paid in the rear, the lender will require a reserve for back interest on the previous loan which has nothing to do with the new loan.
However from a borrowers stand point they view it as a cost of the loan.

Ed Garcia