When shopping for a mortgage, whether it is a purchase or refinance, it is important to not only compare interest rates but to compare closing cost as well.

 

The new good faith estimate, which was designed to make understanding closing cost easier, actually can make it more difficult to understand. I always provide my clients with an itemized closing cost worksheet, in addition to the GFE. I advise that you request the same from whoever you are working with.

 

Closing cost can be broken up into 3 different areas, I will list them in order of importance to you.

 

1. Lender fees (800 lines of a GFE) : This is the area that you need to concentrate on the most. This section will contain POINTS, appraisal, credit report, underwriting fees, processing fees, application fees, and anything else that a lender can dream up. Standard fees will look something like this :

 

Loan discount: varies

Appraisal: $375-$450 - paid in advance of closing

Credit report: $20-$60 -paid in advance of closing

Tax related service fee $70-$90

Underwriting Fee $300-$800

Processing Fee $0-$800

Document Prep Fee $250-$400

Flood Cert $10-$30

Application Fee $100-$400

 

When you review your GFE,  most fees will fall within the ranges above. It really is a shell game, a lender with a high underwriting fee, will likely have a low processing fee. Some lenders require an application fee, many do not. Your lender fees should be in the $600-$1,000 range exclusive of points, appraisal and credit report. If they are lower than this, good for you. If they are higher, the red flags should be raised.

 

Next you will have your closing/attorney fees. These are fees that you can dictate by shopping for your settlement services. Lenders will disclose the fees of a provider that they prefer. I advise that you do a little research on your own to make sure that you are getting the best deal for you. You may want to give your lenders preferred title company the chance to match or beat whatever quote you get. There are advantages to using the company your lender selects. Let's say that you need an after hours settlement at your home. Your loan officer is far more likely to get a favor from someone that he has a relationship with, than someone that you choose on your own.

 

Finally you will have your taxes and prepaid expenses such as escrows and odd days interest on your new loan. These items are non-negotiable. However, refinancing is a great time to revisit your homeowners insurance policy. Most times, you can recieve a lower quote. Ask your loan officer if he can get you a quote. Most loan officers will have relationships with insurance agents that are more than willing to try to earn your business.

 

Finally, I will advise you not to split too many hairs on this. If you are working with someone that you trust and they are securing the rate that you need, it is not a good idea to switch to someone that you do not know anything about over a minimal amount of money. Remember that you are paying for a service, while you should not overpay, you should be cautious fo someone that may no value their own service.