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October 16, 2009, Newsletter Issue #189: How to Compare Closing Costs
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Tip of the Week
Do not confuse closing costs with required escrow amounts. People sometimes do this and make incorrect assumptions about the “cost” of closing a mortgage loan. Closing costs are those items that are true expenses of closing the loan, while escrows (often two months property taxes and two months homeowners insurance premiums) are monies that would be spent anyway to pay for taxes and insurance. They are not additional costs to close the loan (although you will need funds to satisfy this requirement). The most common closing costs to compare:
Origination fee (Points) Loan discount fee (Points) Appraisal fee Application fee, if any Title examination fee Title insurance Closing attorney or escrow company fee Recording fee Survey fee Flood certification fee Home and/or pest inspection Tax service fee Wire transfer fee Postage – usually overnight delivery charges Underwriting fee (“junk fee”) Processing fee (“junk fee”) Funding fee (“junk fee”) The fees noted above are true costs of closing your mortgage loan and should be compared with the different loan products you are considering. You can ask for an estimate before you apply with any source and you will receive a Good Faith Estimate of projected closing costs (GFE) within 72 hours of making an application with any mortgage lender. These costs can vary widely so compare each item.
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