A recent state-by-state study of mortgage closing costs [http://www.mortgage-lenders-plus.com/mortgage.asp] brought the Jabberwocky Factor in the home financing business out into the open. It's an extraordinary sight. This study asked for closing costs on an $180,000 loan - and put the question to six lenders from each of the fifty states.
The average in closing costs ranged from two thousand dollars plus in a couple of Midwestern states plus Arkansas and Wyoming, to between five and nearly seven thousand dollars in five of the Northeastern states - Delaware being the highest. But the fact that illustrates the hit-and-miss nature of the whole process is that while two of the Delaware lenders quoted a tax figure of $6,000 on the loan, one Delaware lender said there was no tax.
That's just the beginning. Included in your mortgage costs may be lender/broker fees including an application fee, administration fee, funding fee, commitment fee, document preparation fee, underwriting fee and tax service. Some of these terms mean the same thing but are used by different lenders.
Then there's the third party fees, many if not all of which are passed through to the buyer. Those terms include (but are not limited to) attorney fees, settlement fees, credit report fees, title insurance, title work, survey and postage/courier fees. Before you get to this stage you'll have appraisal and initiation fees.
Then there's the points that the lender charges or doesn't charge, providing you instead with a No Points! loan with the points built into the interest rate. That's how mortgage costs are made to disappear: they are incorporated into your monthly premium. One way or another, you'll be paying mortgage closing costs.
The question remains then, how much are the mortgage closing costs and how can you compare lenders if the terminology varies from bank to bank, county to county? In some markets, the title insurance falls to the seller to pay. In others, it's the buyer's customary responsibility. So you are faced with variables in terminology, in the division of responsibility between buyer and seller, and in determining what the mortgage broker's take is in all of this.
It is the lender's responsibility to give you a "good faith" estimate of mortgage closing costs. That is by no means a guarantee or even a promise of a competent estimate, as the Delaware tax variation illustrates. Some lenders won't include title insurance, assuming it's the seller's responsibility.
In order to line up apples with apples, you are going to need some cooperation from your broker and some patience with the lenders. Insist on an itemization from each lender and to the degree possible, align the fee structure on a spread sheet. If there are differing names for costs, put them in but what you want are the dollar figures for your mortgage costs, side by side. Your broker isn't required to reveal where his fee is built in until the deal is done. You can insist on transparency from your broker, which will shed a lot of light on what the lender's true fee structure is.
It isn't just the mortgage closing costs that will emerge from this exercise; it's the total of the lender/broker/lawyer/appraiser/accountant fees that are built into your interest rate. That's what you want to get at because if the lender's fees have been converted into interest points, you may have something to negotiate that will pay off for thirty years.
The average in closing costs ranged from two thousand dollars plus in a couple of Midwestern states plus Arkansas and Wyoming, to between five and nearly seven thousand dollars in five of the Northeastern states - Delaware being the highest. But the fact that illustrates the hit-and-miss nature of the whole process is that while two of the Delaware lenders quoted a tax figure of $6,000 on the loan, one Delaware lender said there was no tax.
That's just the beginning. Included in your mortgage costs may be lender/broker fees including an application fee, administration fee, funding fee, commitment fee, document preparation fee, underwriting fee and tax service. Some of these terms mean the same thing but are used by different lenders.
Then there's the third party fees, many if not all of which are passed through to the buyer. Those terms include (but are not limited to) attorney fees, settlement fees, credit report fees, title insurance, title work, survey and postage/courier fees. Before you get to this stage you'll have appraisal and initiation fees.
Then there's the points that the lender charges or doesn't charge, providing you instead with a No Points! loan with the points built into the interest rate. That's how mortgage costs are made to disappear: they are incorporated into your monthly premium. One way or another, you'll be paying mortgage closing costs.
The question remains then, how much are the mortgage closing costs and how can you compare lenders if the terminology varies from bank to bank, county to county? In some markets, the title insurance falls to the seller to pay. In others, it's the buyer's customary responsibility. So you are faced with variables in terminology, in the division of responsibility between buyer and seller, and in determining what the mortgage broker's take is in all of this.
It is the lender's responsibility to give you a "good faith" estimate of mortgage closing costs. That is by no means a guarantee or even a promise of a competent estimate, as the Delaware tax variation illustrates. Some lenders won't include title insurance, assuming it's the seller's responsibility.
In order to line up apples with apples, you are going to need some cooperation from your broker and some patience with the lenders. Insist on an itemization from each lender and to the degree possible, align the fee structure on a spread sheet. If there are differing names for costs, put them in but what you want are the dollar figures for your mortgage costs, side by side. Your broker isn't required to reveal where his fee is built in until the deal is done. You can insist on transparency from your broker, which will shed a lot of light on what the lender's true fee structure is.
It isn't just the mortgage closing costs that will emerge from this exercise; it's the total of the lender/broker/lawyer/appraiser/accountant fees that are built into your interest rate. That's what you want to get at because if the lender's fees have been converted into interest points, you may have something to negotiate that will pay off for thirty years.