Warehouse Fee
Definition and meaning of Warehouse Fee in real estate.
A warehouse-fee is a closing charge levied by a mortgage lender to cover the cost of holding a loan temporarily before selling it on the secondary mortgage market. This fee offsets the short-term interest expenses the lender incurs while utilizing a revolving line of credit to fund the mortgage.
In more detail
Many mortgage bankers do not keep loans on their books long-term. Instead, they use a warehouse line of credit from a larger bank to fund the loan at closing, then quickly sell the loan to investors or agencies like Fannie Mae. The warehouse fee covers the interest and administrative costs of this temporary borrowing period.
Buyers will see this charge itemized on their Loan Estimate and Closing Disclosure documents. It is important to compare this fee among different lenders, as some do not charge it at all.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Paid at | Closing by the home buyer |
| Common amount | Typically ranges from one hundred to several hundred dollars |
| Where to find it | Listed on the Loan Estimate and Closing Disclosure |
A homebuyer reviews their Closing Disclosure and notices a warehouse fee listed under the administrative charges, representing the lender's cost of temporary funding.
Frequently asked questions
Is a warehouse fee negotiable?
Yes, buyers can negotiate this fee or ask the lender to credit it back. It is often grouped under administrative fees, so asking for a breakdown can help identify potential savings.
Why do some lenders not charge a warehouse fee?
Larger depository banks with significant cash reserves do not need to use a warehouse line of credit to fund their loans, so they do not charge this specific fee to buyers.