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LESSON 22: CLOSING COSTS REVIEW
(continued from previous page)
These costs vary considerably by location, so trying
to tell you what each service will cost in your neck of the woods
is a futile exercise. Instead, we've put together the table below
showing what one lender quoted a borrower with good credit in mid-March
2001. The quote is for a 15-year $99,500 refinance mortgage secured
by a $130,000, owner-occupied, single-family home in South Florida.
The quote assumes the loan comes with an escrow account and is closing
on March 31, 2001.
| Overall cost of fees |
|
Lender fees
|
| |
Discount points
(0.25%) |
$248.75
|
| |
Document preparation
|
$195.00
|
| |
Loan processing
|
$295.00
|
|
Third-party fees
|
| |
Appraisal |
$300.00 |
| |
Credit report |
$16.00 |
| |
Settlement or closing
|
$150.00 |
| |
Title insurance
|
$575.00 |
| |
Courier |
$50.00 |
|
Government fees
|
| |
Recording fee |
$100.00 |
| |
Documentary stamps
|
$348.25 |
| |
Intangible tax
|
$199.00 |
|
Escrow/interest fees
|
| |
Prepaid interest
|
$18.74 |
| |
Homeowners insurance
|
$162.50 |
| |
Real estate taxes
|
$1,033.33
|
| Grand total
of all fees: |
$3,691.57
(3.7% of the loan amount)
|
Of all the charges you pay, lender fees are the most
flexible. These costs -- often referred to as "junk fees"
-- simply line the lender's pocket. In addition to the names found
in the above example, these fees may be listed as "Funding
& Review Fees," "Payment Processing Fees," "Administrative
Fees" or "Doc Prep Fees." See
Tip 2
|
Smart shoppers will obtain GFEs
from multiple lenders, compare their costs, then ask their
chosen lender to meet or beat the fees competitors are charging.
|
 The
annual
percentage rate, or APR, found in advertisements can be
misleading. Mortgage lenders don't always include all the fees
they charge in the calculation that determines APR, so customers
who use that figure to shop rather than an itemized breakdown
of rates, points and fees may end up comparing apples to oranges. |
Tip 1:
If you close early in a given month, you have to pay a fair
amount of interest for the few days after closing that your
loan is on the books but on which you haven't started making
regularly scheduled monthly payments. By closing as close
to the last day of the month as possible, you'll reduce
the amount of prepaid interest owed at closing.
Cut homeowner's insurance costs
by asking your insurance agent what safety features will
reduce the premium, such as safety bolts, storm shutters
or a security system.
Tip 2:
Ask about the fees, and compare lenders based on
those costs, not just the rate. Lenders don't set fees for
third-party services, such as title searches and appraisals.
But they can adjust their own fees.
There may be fees left off the
"good
faith estimate" the lender gives you. Ask the lender
to tell you about the fees that aren't listed. Ask the lender
to waive them and get the promise in writing.
Someone looking to refinance
an existing mortgage may want to get a loan quote from the
company currently servicing the loan. Sometimes, lenders
will offer their current customers closing cost discounts
or expedited closings because they don't have to go through
all the steps a new lender would.
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