A minefield of mortgage charges:

Understanding the 360-day year and other industry oddities

Last week I discussed the various mortgage charges for which borrowers could shop. It is also important for mortgage borrowers to know the charges they can’t shop, if only to avoid wasting time trying to shop or negotiate them.

Private mortgage insurance (PMI): On a conventional (not a Federal Housing Administration-insured or Department of Veteran’s Affairs-insured) mortgage, you are required to purchase PMI if you put less than 20 percent down on a purchase, or have less than 20 percent equity on a refinance. Because the insurer is selected by the lender, PMI has never been "shopable" by the borrower, who pays the premium quoted by the lender.

This will change in a few months when a major mortgage insurer will be quoting premium rates on my website. The quotes will cover both monthly premiums and single premiums financed in the mortgage, offering borrowers a choice they do not now have. Until then, however, PMI will remain "unshopable."

Appraisal: On most mortgage loans, lenders require that the property be appraised in order to make sure that the purchaser is not overpaying, or that a refinancing borrower has the equity (value less loan balance) that is required. The appraisal company is selected by the lender and paid by the borrower. The fee generally ranges from $300 to $600.