A tax service company gets paid to research the current amount of property taxes that are due, if any, and what the taxes are on the unit itself.
A tax service company also insures a lender throughout the life of a mortgage that property taxes have been paid and are not delinquent, forcing a potential tax sale. Tax service companies let a lender know when taxes become seriously past due so the lender can take action. For example, the lender can pay the taxes on your behalf, then schedule a repayment plan for you to pay it back.
Tax service companies typically charge $15 to $25 for this service that you pay for at closing.
A flood certificate researches recent Federal Emergency Management Association (FEMA) flood charts to see if any part of the structure or grounds is in a flood zone. Every decade, FEMA surveys an area and provides an updated flood plain map, and flood reporting companies provide the data to the lender.
Flood certificates can cost between $60 and $70.
Lender fees go by various names. Lenders may charge whatever they want, as long as they're competitive with other lenders in the area.
Except for an application fee, lender fees are paid at closing. Common lender fees include the underwriting fee, administrative fee, loan processing fee, document fee, and others.
Some of these fees are legitimate. Others are questionable. Processing a loan is a physical act. There is a loan processor, and it requires a lot of work to get your loan from the application stage to the closing table.
Underwriting is also a physical act. It ensures that the loan complies with lending guidelines in terms of credit, income, assets, and other loan approval requirements.
Pretty much anything else should be called a “junk” fee. Junk fees have important sounding names, but they are a bit nebulous. Common junk fees are administrative, preparation, or simply mortgage broker fees.
These fees are income to the lender. They may be used to offset a lower rate quote, or they may be pure profit.
Underwriting fees are around $500; processing fees are usually $400 to $500. Junk fees are usually no more than $400 per line item.