One thing I know for sure: No one wants to pay closing costs. Trust me, I understand. I own multiple homes, I pay plenty in interest each year, do you think I want additionally fees when I refinance? Of course not. I am no different than anyone else. In spite of the bitter pill that is closing costs, the reality is that Loan’s cost money; Fee’s are assessed for services preformed. If you don’t want any fees, don’t request any work to be done on your behalf.
Loan Officers understand how uncomfortable closing costs can be, so in an effort to earn your trust and your business, many Loan Officers have started adjusting the way fee’s are presented. When preparing a Good Faith Estimate, many Loan Officers will leave certain settlement costs out, opting instead to disclose only those fees for which they are responsible. While this may be legal, I find it highly unethical. Nonetheless, I am confronted weekly with flawed Good Faith Estimates, followed by questions about why my costs seem so much higher. MY FEES ARE NOT HIGHER, they are simply fully disclosed.
In hopes of making your life easier, and taking some of the pressure of your Loan Officer, I am going to give a quick breakdown of what closing costs and settlement fees you ought to find on a Good Faith Estimate. I will not provide specific amounts, simply which fees to look for.
- Items Payable in Connection With Loan: These fees are those directly associated with the processing of your loan. They will include the Origination Fee, Processing Fee, Appraisal, Underwriting, etc. This is the section which a Loan Officer is required to disclose, therefore you will typically see this in most Estimates.
- Title Charges: These include the closing or escrow fee as well as the Title Insurance. This will typically be disclosed, however beware of large discrepancies in Title Insurance amounts. A Loan Officer has no say in the amount of title insurance you pay. This amount is determined by the title insurance company, and most Title Insurance Companies are simply selling Policies for larger nationwide companies, so the rates will be fairly similar from one company to another.
- Government Recording and Transfer Charges: This will vary depending on the county as well as the lender. Typically this will include the cost of recording the new Deed of Trust for your loan. Depending on the number of pages to be recorded, this fee will vary.
- Pre-Paid Items: This may include any prepayment of Mortgage Insurance or Hazard Insurance Premiums. This will also include interest that will be assessed from the day of your closing to the date of your first payment. The later in the month you close, the lower this fee will be.
- Reserves for Escrow: This is the most common section for a Loan Office to leave blank. This includes the initial deposits for your Hazard Insurance Premium and Tax Assessment Reserves. These amounts are deposited into your escrow account monthly to cover your insurance and tax responsibilities when they are due. The Tax reserve will vary depending on the month you close for a refinance. For a purchase your tax reserve will typically be 2-4 months. Expect your Insurance reserves to be 12-14 months worth.
