A lender will also run a credit report on you after you complete the loan application and have signed the required forms authorizing the lender to do so. A credit report is good for 90 days, after which an update will be performed at an additional cost.
Sometimes a credit report that is pulled on two people at the same time shows one person with good credit and one person with not so good credit. If the loan is being denied because of the not so good credit, then a report will be ordered by the lender and reissued, removing the person with bad credit from the credit report.
In community property states, the lender will still require the credit report on the person with bad credit, but only to see if there are any joint credit accounts for which the buyer will be responsible.
Credit reports typically run between $15 and $20. Updates can cost $5 or so.
Sometimes an application fee is collected up front by the lender. This fee covers the costs of the appraisal and credit reports. It may also offset any initial overhead the mortgage company acquires during the approval process.
An application fee is also inconvenient if you get upset with the lender and want to transfer your appraisal to another mortgage company. When you pay an application fee you technically haven't paid for the appraisal, and if the mortgage company gets upset with you as well, it just might not release the appraisal because, well, you didn't pay for it; you only paid an application fee.
For your own protection, even though you may write a check for an application fee, simply putting the word “appraisal” in the memo line on the check will take care of any confusion down the road.
Application fees also let lenders know that they've got a serious client on the other end of the phone and not a “rate shopper” who will not commit until they've nearly run out of time.
Application fees can run anywhere from $300 to $500.