Explaining Loan Origination Fees

Lenders occasionally charge an origination fee as a way to compensate themselves for generating the loan itself. Not only is this done as a way to cover their own expenses related to creating the loan, but it is extra money for them on a loan that may be potentially risky. In other words, it is a way to add extra interest on the loan itself.

Most loans that do include an origination fee in the United States range between 0.5% to 1% of the total principle of the loan. This is a big way that the lender collects money for the work that they put into a loan on the front end. They will also be compensated via the interest payments over the life of the loan, but this is a great way for them to capitalize on some return immediately.

Don’t Let Jumbo Loan Costs Stop Your Dream Home Purchase

A jumbo loan is a loan that exceeds the bounds of a traditional loan for one’s mortgage. There is a cap in most counties in the United States of $510,400 for a mortgage loan, but some people need more money than that to purchase the home that they want.

These loans are not backed by Freddie Mac or Fannie Mae, and that makes them considerably more risky for the borrower. That being said, the only people who can and should apply for a jumbo loan are those who have considerable income and resources.

The required credit score for this kind of loan is at least 700, but it can be as high as 720 depending on the exact lender and the preferences that they have regarding who they lend to. Only highly qualified buyers need apply.

Know What It Means To Have An Encumbrance

A reconveyance deed is commonly used to remove an encumbrance to “reconvey” a clear title to the property owner. The most common types of real property encumbrances are mortgages, property tax liens, and deed restrictions. When a mortgage is paid off, the encumbrance is removed from public records of the property.

In the case of a tax lien, a lien will remain on the property until the tax is paid. In some instances, the owner may be forced to sell the property to satisfy liens. A deed restriction places conditions on how a property may be used by a future owner. A good example is farmland preservation encumbrance where there is a stipulation that the land may never be used any other purposes.