Most U.S. Home Buyers Are Overpaying Mortgage Fees and Simple Comparison Shopping Can Save Them Thousands

A new study has uncovered a surprising and expensive pattern in the U.S. housing market: most home buyers are paying more mortgage fees than they should, and often without realizing it. The research, conducted by Cheng “Cathy” Zhang from the University of Florida’s Warrington College of Business, takes a deep dive into the world of mortgage costs — an area many borrowers underestimate or misunderstand. The findings point to a market worth more than $13 billion a year in fees alone, with a significant portion of that total stemming from unnecessary overpayment.

The core takeaway is straightforward. When lenders have the opportunity to charge higher fees, many of them do — and borrowers who don’t compare options are the ones who end up footing the bill. Yet the study also highlights an equally important point: simply shopping around for different mortgage offers can lead to real savings. According to the research, borrowers who compare lenders save an average of $32 in upfront fees and more than $1,000 in interest over the life of a loan. With so many lenders offering instant online quotes, the study notes that comparing fees is easier today than it has ever been.

One of the most striking findings is how little consumers know about mortgage fee variation. Even though interest rates attract most of the attention, fees also vary dramatically from lender to lender. Many buyers don’t realize how negotiable or flexible these costs can be, which leaves them vulnerable to overpaying. The study suggests that this lack of awareness is a major reason the market behaves the way it does — borrowers simply don’t push back or shop around because they don’t know that doing so matters.

Starting in 2018, the Consumer Financial Protection Bureau (CFPB) began collecting more detailed information on mortgage costs, including origination and other lender-imposed fees. Before that, researchers lacked nationwide data on many of the charges involved in getting a mortgage. With this new transparency, Zhang was able to analyze patterns across the market and uncover the extent of overpayment.

Across the dataset, typical mortgage fees were found to range between 1–3% of the total mortgage amount, which averages out to just over $1,000 on a standard loan of around $269,000. However, some loans carried fees as high as 8% — an unusually steep price for what should be a competitive service. This wide spread suggests that some lenders charge significantly more than others for essentially the same work.

Interestingly, the study also explores simplified or zero-fee loans, where lenders roll the costs into the interest rate instead of charging upfront. Although this strategy might sound like paying more over time, Zhang’s research shows that these loans can actually offer overall savings depending on the borrower’s situation. In many of these products, the total cost ends up lower because the trade-off between fees and interest is more efficient than what borrowers often accept in standard loan structures.

Not all borrowers are overpaying equally. The study finds that experienced home buyers, those with higher incomes, and borrowers who have gone through the mortgage process before tend to pay less. These groups are more likely to compare offers, understand the components of a mortgage quote, or feel confident asking questions. In contrast, first-time buyers, lower-income borrowers, and people with less education are more likely to pay higher fees. Their lack of familiarity with the mortgage process contributes directly to their increased costs.

This pattern highlights a marketplace where knowledge plays a major role. Mortgage fees aren’t just numbers on paper — they reflect the borrower’s ability to navigate a complex financial system. The study essentially shows that the mortgage market rewards people who understand how things work and penalizes those who don’t.

To truly grasp why these overpayments happen, it’s useful to understand the broad categories of mortgage fees. Common costs include origination fees, underwriting fees, processing fees, and sometimes lesser-known charges like discount points or application fees. Lenders have discretion over many of these, which means two different companies can charge completely different prices for identical tasks. Without comparison shopping, borrowers have no way of knowing whether the fee in front of them is high, low, or average.

One of the broader implications of this study is that consumers often focus heavily on interest rates but underestimate the role of fees. While interest rates absolutely matter, fees can raise the total cost of a mortgage in meaningful ways, especially for people who refinance or move within a few years. A slightly higher interest rate paired with zero fees may actually cost less than a lower rate with steep upfront charges. Learning to interpret the entire Loan Estimate — not just the quoted rate — is a valuable skill for anyone entering the housing market.

The research also sheds light on the behavioral aspect of borrowing. Many home buyers find the mortgage process stressful and feel overwhelmed by paperwork, terminology, and deadlines. In that anxiety, they sometimes accept the first offer they receive. The study suggests that this emotional component likely plays a role in widespread overpayment. A calm, methodical approach — such as collecting multiple quotes before deciding — counteracts that tendency and leads to better financial outcomes.

Beyond the consumer side, it’s worth noting why the mortgage market functions this way. Although competition theoretically pushes fees downward, the market has structural issues. Borrowers don’t frequently compare offers, lenders price their services in opaque ways, and fees can be bundled or unbundled differently from company to company. This creates a landscape where significant variation goes unnoticed and unchallenged.

Although this study focuses on mortgage fees specifically, it fits into a bigger picture of financial literacy and consumer protection. When borrowers don’t know what questions to ask, industries with discretionary pricing can extract more from them. The housing market — with its emotional stakes, large loan amounts, and high-pressure timelines — is especially vulnerable to this dynamic.

For home buyers, the most practical takeaway is simple: get multiple quotes. Even two or three comparisons can reveal whether a fee is normal or inflated. Buyers should also ask lenders directly about fee structures, zero-fee loan options, and whether any charges can be reduced or waived. In a market where fees are not standardized, information becomes the borrower’s greatest advantage.

Zhang’s study ultimately provides clear evidence that the average borrower has more control over mortgage costs than they realize. By understanding how fees work and by taking small steps like comparison shopping, they can avoid unnecessary expenses that add up over the long term.

Research Paper:
Do U.S. Borrowers Overpay Mortgage Fees? (The Journal of Real Estate Finance and Economics)
https://link.springer.com/article/10.1007/s11146-025-10039-2