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hello me and my wife are going to contract soon on a home we are buying. the approved price is $310k. we are working directly with a mortgage broker on this sale. long story. buying house from bank. house is part of estate which is friend of fam. bank accepted offer we've talked to our lawyer and contacts are being drawn up. I'd like to make sure we are not getting taken advantage of with the closing costs. how can I calculate about what they should be and include. thanks a lot.
Points purchased (if any)
Flood cert
MERS
Tax Service fee
Lender title insurance
Settlement/attorney fees
Recording fees
Prepaids like interest, property tax, mortgage insurance (if applicable)
Initial escrow funding (if you're paying property tax and home ins via escrow)
Prepaids: this is the amount of property taxes and homeowners insurance due at closing, either to pay what is due the date you close, or also to collect a sufficient amount to fill the tax&insurance Escrow, or impound account. While this will vary based upon your closing date, the collection will also be pretty much identical among lenders. (also includes prepaid mortgage interest which is calculated based on your closing date)
Lender fees, or Origination Fees: this is what you want to focus on. Some lenders break it up: Processing fee, Underwriting, Credit report, technology fee, etc. Some have a lump sum.
Look for any Discount fee. A "Discount Point" is a fee equal to 1% of the loan amount (can also be a fraction) that is charged in exchange for a certain interest rate. As different lenders have different overhead, profit margins, staffing, etc., different lenders will charge more or less.
So as you evaluate the interest rate, also look for the lender costs involved. Compare the APR as seen on your Loan Estimate. Then, if you shop, also evaluate who might be more trustworthy, professional and responsible. I wouldn't quibble over small cost amounts if I feel like a lender charging a little more makes me feel a lot better about things. Just my opinion.
Prepaids: this is the amount of property taxes and homeowners insurance due at closing, either to pay what is due the date you close, or also to collect a sufficient amount to fill the tax&insurance Escrow, or impound account. While this will vary based upon your closing date, the collection will also be pretty much identical among lenders. (also includes prepaid mortgage interest which is calculated based on your closing date)
Lender fees, or Origination Fees: this is what you want to focus on. Some lenders break it up: Processing fee, Underwriting, Credit report, technology fee, etc. Some have a lump sum.
Look for any Discount fee. A "Discount Point" is a fee equal to 1% of the loan amount (can also be a fraction) that is charged in exchange for a certain interest rate. As different lenders have different overhead, profit margins, staffing, etc., different lenders will charge more or less.
So as you evaluate the interest rate, also look for the lender costs involved. Compare the APR as seen on your Loan Estimate. Then, if you shop, also evaluate who might be more trustworthy, professional and responsible. I wouldn't quibble over small cost amounts if I feel like a lender charging a little more makes me feel a lot better about things. Just my opinion.
thanks again. greatly appreciate it. so is there a rule of thumb to gauge how much the lenders fee should be. I have to be honest I feel like we are going to be overcharged by the broker. again long story ..we have to use this broker. also we are signing contracts tomorrow . it's a short sale
thanks again. greatly appreciate it. so is there a rule of thumb to gauge how much the lenders fee should be. I have to be honest I feel like we are going to be overcharged by the broker. again long story ..we have to use this broker. also we are signing contracts tomorrow . it's a short sale
There is not really a rule of thumb. So many people say "I got this rate!" and there are literally 26 factors that determine an interest rate on a mortgage loan. You can even have lenders with identical lender fees and no discount fee, with different rates, because they "bake in" their profit margin, and it's really complex to try to explain.
I would seek another lender, tell them your credit scores and the parameter of the deal, see what they offer, at what cost, and at least you might have a better feeling of confidence, or skepticism, as the case may be.
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