Closing Costs and Mortgage Fees: Or how the bad man made me pay too much.
We have all heard horror stories about good folks being buried in surprise fees, or fees being buried so deep in paperwork that nobody could tell who was getting what. Please use this as a common sense approach to making sure you are getting a good deal on your mortgage.
I will start by listing the fees that all loans will be charged. These, no matter what someone tells you, will ALWAYS be charged to close a loan.
1. Title Charges:
$350-450 for a closing fee. You pay this to the person that coordinates your closing and goes through the paperwork with you and tells you where to sign. If you have the choice in title company you may get a better price, but with a purchase (particularly a foreclosure purchase) expect $450.
$350-$? For title insurance. This is charged based on your loan amount. In general if you take your loan amt. In Thousands multiplied by 3.5, you will get the answer. So for $100,000 loan amount you figure as (100x3.5=$350).
Note: When purchasing a foreclosure, plan on paying for the bank's title insurance as well. It is required by your lender to have title insurance for the seller, and most banks' policy is to not pay for this themselves. Not very fair, but that's what their attorneys came up with to get them more money.
2. "The Man":
$75-$125 Recording fee. This goes to the register of deeds to record your mortgage with your local government.
3. The Lender:
Whether you are using a broker or you go directly to a bank, there will be a few charges from whoever it is that is lending you money.
1%-3% Origination Fee. This will typically be 1%, though it may be higher depending on the amount of service your loan will require. Like with any of these fees, don't be afraid to ask why any certain amount is being charged. Any good loan officer will have a certain amount their services are worth and will unabashedly explain their fee. The folks to watch out for are the ones willing to negotiate their origination or look at this amount as arbitrary. Demand confidence and expect the service to back it up!
$595-$795 as an Underwriting Fee- For the evil people that make a credit decision for you by picking apart the most inane details of your life.
$250-$500 as a Processing Fee- Most lenders have both a person that is your loan officer and a processor that basically sifts through all of the paperwork, making sure every tiny detail is in order.
$40-$60 for a Wire Transfer fee for the people that handle the actual dispersing of money between them and the seller or your current lender if you are refinancing.
So those are the fees you should expect to see on any loan. Anyone telling you something different...expect them to explain it to you because chances are they are not being totally honest. Do yourself a favor and avoid any loan officer or bank that provides you a Good Faith Estimate without these charges included, because they will be included eventually! It should also go without saying (now that you are better educated) that you should avoid any loan officer or bank that does not immediately provide you with a Good Faith Estimate at all...mostly because it is required by law that they do.
The final math on all of the above comes to about $3000 for a $100,000 loan. This is about what you should expect for your closing costs on a purchase loan no matter where you go. A refinance is a bit cheaper, plan on about $2000-$2500. This does not include any of your "Pre-Paid charges". Pre-Paids include you tax and insurance escrow, per diem interest, and Pro-rated taxes (on a purchase). I will explain these in future blogs, but none of these are determined by your loan officer and are non-negotiable.
I will start by listing the fees that all loans will be charged. These, no matter what someone tells you, will ALWAYS be charged to close a loan.
1. Title Charges:
$350-450 for a closing fee. You pay this to the person that coordinates your closing and goes through the paperwork with you and tells you where to sign. If you have the choice in title company you may get a better price, but with a purchase (particularly a foreclosure purchase) expect $450.
$350-$? For title insurance. This is charged based on your loan amount. In general if you take your loan amt. In Thousands multiplied by 3.5, you will get the answer. So for $100,000 loan amount you figure as (100x3.5=$350).
Note: When purchasing a foreclosure, plan on paying for the bank's title insurance as well. It is required by your lender to have title insurance for the seller, and most banks' policy is to not pay for this themselves. Not very fair, but that's what their attorneys came up with to get them more money.
2. "The Man":
$75-$125 Recording fee. This goes to the register of deeds to record your mortgage with your local government.
3. The Lender:
Whether you are using a broker or you go directly to a bank, there will be a few charges from whoever it is that is lending you money.
1%-3% Origination Fee. This will typically be 1%, though it may be higher depending on the amount of service your loan will require. Like with any of these fees, don't be afraid to ask why any certain amount is being charged. Any good loan officer will have a certain amount their services are worth and will unabashedly explain their fee. The folks to watch out for are the ones willing to negotiate their origination or look at this amount as arbitrary. Demand confidence and expect the service to back it up!
$595-$795 as an Underwriting Fee- For the evil people that make a credit decision for you by picking apart the most inane details of your life.
$250-$500 as a Processing Fee- Most lenders have both a person that is your loan officer and a processor that basically sifts through all of the paperwork, making sure every tiny detail is in order.
$40-$60 for a Wire Transfer fee for the people that handle the actual dispersing of money between them and the seller or your current lender if you are refinancing.
So those are the fees you should expect to see on any loan. Anyone telling you something different...expect them to explain it to you because chances are they are not being totally honest. Do yourself a favor and avoid any loan officer or bank that provides you a Good Faith Estimate without these charges included, because they will be included eventually! It should also go without saying (now that you are better educated) that you should avoid any loan officer or bank that does not immediately provide you with a Good Faith Estimate at all...mostly because it is required by law that they do.
The final math on all of the above comes to about $3000 for a $100,000 loan. This is about what you should expect for your closing costs on a purchase loan no matter where you go. A refinance is a bit cheaper, plan on about $2000-$2500. This does not include any of your "Pre-Paid charges". Pre-Paids include you tax and insurance escrow, per diem interest, and Pro-rated taxes (on a purchase). I will explain these in future blogs, but none of these are determined by your loan officer and are non-negotiable.
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