How many points can I legally be charged?

You may wonder how many origination points you can legally be charged by your mortgage broker. The maximum fee cap varies from state to state. Wisconsin for example the broker is capped at 6% total commission. This means that you could be charged up to 6 points origination fee by your broker. This can also be split up between lender paid Yield spread rebates to the broker and origination fees.

Not only does the maximum fee or number of points that a mortgage broker can charge vary by state, but it also varies by each lender. Each lender has their own policy in force that determines how much they will let a loan officer charge a customer. Many lenders are starting to cap the maximum points that can be charged to a borrower to 5%.

Usually, depending on the loan program, things such as points are negotiable. Very rarely will the number of points charged be at the maximum amount possible.

If you are wondering wether the mortgage broker you are working with is charging the maximum number of points allowed, you may consider working with another broker. However, there are situations that can exist, that would merit an unusually high fee (points) be charged for a loan. If you are wondering, call two or three other mortgage brokers and explain your scenario with great detail to see where your deal ranks with what they may be able to do for you.

As a rule of thumb, 1% percent is the what most reputable brokers will charge for an origination fee, if the loan falls within normal loan amounts.

Your loan officer is probably willing to work with you on how they make their money. For example, if you want lower closing costs, they may increase your interest rate to be paid yield spread from the lender that completely covers their fees. On the other hand, if you want the lowest interest rate, they may put all of their fees in 'origination fee', and you will pay for it out of your closing costs. Tell your loan officer what is important to you, and they should be willing to work with you on it. If not, you might consider finding a new one.

Depending on your situation you may want to re-think the question. It isn't how many points can I be charged but instead should be "how many points will I allow myself to be charged"? Many direct lenders charge a lot of points. One way to advoid being overcharged is to work with a broker or mortgage professional that is not a direct lender. Look over your good faith estimate and make sure your comfortable with the charges.

» DISCLAIMER: The information contained in this article on 'How many points can I legally be charged?' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.