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Definition: Junk Fees
The item-wise upfront fees which the lender charges from the borrower as a part of the process of signing the mortgage is generally termed as Junk Fees. In colloquial terms it is often also known as garbage fees. Generally these sort of fees remain hidden within the mortgage documents and are charged not as points or percentage of the mortgage loan amount. Typically they are not known to the borrower before the transaction and hence it is advised to reduce junk fees in mortgage.
Settlement fees, sign up fees, underwriting fees, funding fees, translation fees, notary fee, express mail fee, amortization fees, messenger fee, document review fee, assumption fee, affiliate consulting fees, application fee, administrative fee, document preparation fee etc. are typical examples of junk fees. The main motive behind charging such fees before the closing of the mortgage signing process is that the borrower will not take a back step in signing the loan and walk away from the mortgage deal, since a part of his money is already invested in these junk fees.
For example: while purchasing property there is ample example of such junk fees which are to be paid. People usually engage in such activity once or twice in their life time and hence they are not very knowledgeable about such costs. Although there is no way to possibly avoid all of them but, unusually high fees can be brought down by negotiation. Generally in US it turns out be that in the closing process the closing cost of a mortgage deal involving property comes out to be around 3-5 % of the price of the property. In such condition if the real estate market in the local area is favourable to the buyers then it is possible to go through all such costs in a transparent manner. Else an alternative option of paying all – in – one seems to be reasonable enough to bring down the Junk fees.