Wednesday, January 04, 2006
Mortgage Closing Costs, how much is too much?
I'll attempt to give a brief overview of the confusing world of loan closing costs. I'll go over the main three categories of closing costs and what are included in each. In my next post, I'll discuss the monies due at loan closing that are not considered closing costs and why. This post refers to a purchase or refinance loan transaction, not the sale of a home, which incurs different fees.
Closing costs are broken up into three main categories, appraisal fees, lender/broker fees, and title fees. Appraisal fees are the least complicated of the three categories. On the vast majority of loans, there is only one fee for the appraisal. This fee can range based on the size of the house and the type of appraisal ordered. The standard fee for a medium sized owner occupied house in Arizona is roughly $350 right now. Houses with larger square footages require more work and therefore, have higher appraisal costs. Also, investment properties generally have higher fees because lenders require two extra forms included with the appraisal, a rent survey and income statement. The appraisal fee or fees should be in section 800 of a properly filled out Good Faith Estimate. You may pay these fees directly to the lender, but they will eventually be paid to an appraiser for services rendered.
The second category of closing costs consists of lender/broker fees. These are also contained in section 800 of a properly filled out Good Faith Estimate. There are many different lender/broker fees that could be found in this section. If you are paying any points on a loan, they will be in this section. Also, broker fees, credit report fees, loan origination, escrow waiver fees, tax service fees, processing fees, underwriting fees, etc. The basic point of this section of the Good Faith Estimate is to encompass any fees being charged by the broker or lender in a loan transaction (with the exception of the appraisal fee, which also resides in section 800).
The third category of closing costs includes any fees associated with the title company. These fees are included in section 1100 & 1200 on a Good Faith Estimate. They are the fees required by the title insurance agency for the various jobs they perform in closing your loan. Usually, the largest sum of the title fees is for title insurance. The title company researches the history of the title on a property and insures that it provides accurate information to all parties. Another large chunk of the title fees is for the closing or escrow fee. This is the fee charged by a title company to prepare the closing documents for signing, go over the closing documents with the borrower, notarize them, and make sure they are accurate. There may also be other fees included in the title section for smaller items such as endorsements (don't ask), release and tracking fees, recording fees, notary fees, etc.
Those are the main closing costs associated with the vast majority of loans (I haven't seen any others, but that doesn't mean they don't exist). There are other items contained on a Good Faith Estimate, but they are not actually considered "closing costs." I will go over those items in my next post.
I am always available to answer questions on closing costs and/or other mortgage related items. If you have received a Good Faith Estimate from a lender and would like to make sure you are not being over-charged, I will be happy to look it over for you. You can contact me by following the links on the left side of this blog or email me at jmoran@azmortgagepro.com or call me at 602-476-7323.
Closing costs are broken up into three main categories, appraisal fees, lender/broker fees, and title fees. Appraisal fees are the least complicated of the three categories. On the vast majority of loans, there is only one fee for the appraisal. This fee can range based on the size of the house and the type of appraisal ordered. The standard fee for a medium sized owner occupied house in Arizona is roughly $350 right now. Houses with larger square footages require more work and therefore, have higher appraisal costs. Also, investment properties generally have higher fees because lenders require two extra forms included with the appraisal, a rent survey and income statement. The appraisal fee or fees should be in section 800 of a properly filled out Good Faith Estimate. You may pay these fees directly to the lender, but they will eventually be paid to an appraiser for services rendered.
The second category of closing costs consists of lender/broker fees. These are also contained in section 800 of a properly filled out Good Faith Estimate. There are many different lender/broker fees that could be found in this section. If you are paying any points on a loan, they will be in this section. Also, broker fees, credit report fees, loan origination, escrow waiver fees, tax service fees, processing fees, underwriting fees, etc. The basic point of this section of the Good Faith Estimate is to encompass any fees being charged by the broker or lender in a loan transaction (with the exception of the appraisal fee, which also resides in section 800).
The third category of closing costs includes any fees associated with the title company. These fees are included in section 1100 & 1200 on a Good Faith Estimate. They are the fees required by the title insurance agency for the various jobs they perform in closing your loan. Usually, the largest sum of the title fees is for title insurance. The title company researches the history of the title on a property and insures that it provides accurate information to all parties. Another large chunk of the title fees is for the closing or escrow fee. This is the fee charged by a title company to prepare the closing documents for signing, go over the closing documents with the borrower, notarize them, and make sure they are accurate. There may also be other fees included in the title section for smaller items such as endorsements (don't ask), release and tracking fees, recording fees, notary fees, etc.
Those are the main closing costs associated with the vast majority of loans (I haven't seen any others, but that doesn't mean they don't exist). There are other items contained on a Good Faith Estimate, but they are not actually considered "closing costs." I will go over those items in my next post.
I am always available to answer questions on closing costs and/or other mortgage related items. If you have received a Good Faith Estimate from a lender and would like to make sure you are not being over-charged, I will be happy to look it over for you. You can contact me by following the links on the left side of this blog or email me at jmoran@azmortgagepro.com or call me at 602-476-7323.
