Why would mortgage company charge application fee?

There are both hard and “soft” costs to a mortgage company for processing your application, even in the initial stages. Credit, appraisal, mailing and other third party costs generally run hundreds of dollars. Loan staff must spend several hours completing your application, documenting it for the local regulators, withdrawing or denying it formally if you do not qualify or choose not to move forward. Some lenders charge every applicant to avoid having to pass those “costs of business” on to their paying customers. Some may also want to obtain some good faith commitment that assuming all goes well, you intend to proceed … that you arent putting in an application at 10 different lenders only to choose one later in the process. Some, perhaps less correctly, do it to dissuade those that cannot even afford the application costs from attempting to obtain a mortgage. Those that DO NOT take an application fee are taking the risk that they will pay significantly out of pocket for every application that does not materialize. Some feel that this is worth the risk on order to speak to as many applicants as possible … and some do not … according to their individual business model.