Closing costs, what's normal? (sale, mortgage, credit)

[ReadyFreddy]

I just signed everything for a new house. Mortgage origination fee was about 2% of the sale price? Do buyers always pay that? Why don't the lenders pay the originators?

Also, PMI is about 1% of the sale price as an UP FRONT cost PLUS your $100+ monthly premiums! I asked what was with the giant, up front fee. The title company guy said it was a new thing, probably to pay for all the mortgage fall-out.

[rational1]

The mortgage origination fee is also known as "points." It buys down the interest rate. You probably could have received a no-points loan at a somewhat higher interest rate.

If you didn't realize this...you probably shouldn't have been signing, not because you necessarily got a bad deal, but because you did not fully understand the nature of the transaction.

[ReadyFreddy]

Thanks. That helps. I actually have a finance degree, so it's doubly bad. No one talked "points" to me, though I admit I didn't read all the paperwork at application time. I wonder why the title guy didn't explain it that way when I asked him? I do know my interest rate is ridiculously low, so I feel better.

I should add my L.O. was marginal. I started with my own bank, then that guy quit or was let go. So I went with who my agent suggested. Then HE was let go. So I got passed off to some kid.

[rjrcm]

Originally Posted by ReadyFreddy

... I wonder why the title guy didn't explain it that way when I asked him? ...

Your "title guy" is not a mortgage expert. It's up to your lender to explain your loan terms and fees.

As said, your low rate is probably why the origination fee/points is so high.

[Home Addict]

Imagine you are halfway done signing, and the title guy tells you that, "Oh, by the way, you could have paid no point with a higher interest rate." And then you say, "Yeah, I want that deal instead."

The title guy would have to go back, call the loan officer, and reprint EVERYTHING with the corrected loan details, and probably get your deal signed another day/time.

It is much easier to just say, "It's a sign of the times. Please continue signing..."

[rjrcm]

Originally Posted by Home Addict

Imagine you are halfway done signing, and the title guy tells you that, "Oh, by the way, you could have paid no point with a higher interest rate." And then you say, "Yeah, I want that deal instead."

The title guy would have to go back, call the loan officer, and reprint EVERYTHING with the corrected loan details, and probably get your deal signed another day/time.

It is much easier to just say, "It's a sign of the times. Please continue signing..."

Again, the title guy is not qualified to give loan advice. Their job is to complete the paperwork as given to them and not to comment on whether you could have gotten a better deal or not. The buyer should check all that out before they commit to the loan.

[Ponderosa]

Each point paid on a 30 year loan typically reduces the interest rate by 0.125%. The "origination fee" is a lender skim/fee off the top. It usually does not reduce the interest rate. It is just payment to the lender for their services.

The lender should have given you a HUD-GFE form. The points/fees are lines 1 and 2 of page 2 of this form. Typically, points are stated as a separate line item from origination fee. It gets murky with points and interest variable. Look at the APR for various loan scenarios if you want to compare apples to apples. Lower APR is lower cost over the life of the loan.

[Zippyman]

Next time, go to a credit union.

They're faster, cheaper, and less of a scourge on the community than the big banks.

[ReadyFreddy]

I talked to my L.O. It's not "points", it's just bundled origination and "junk" fees. I guess 1% is normal orig. fee and around $1400 for "junk fees" they tell me is actually a little lower than most. Not a nice phrase. Maybe I heard him wrong.

I over-analyze everything but I just close my eyes and sign when it comes to mortgages. I can't argue with all the fees so I just try to turn a blind eye because they're so flippin high it makes me wonder if I need to second guess them all.

What an inefficient market. So between both parties, it costs what... 17% or so to exchange a house (with mortgages involved)? I know it's not like buying stock but wow. I'm sure if it could be done much cheaper someone would be trying it and it'd force it all down.

An agent friend tells me I stole this house and got a great situation overall and I need to pop a beer and relax and congratulate myself, not sweat the details.

[Ponderosa]

Originally Posted by ReadyFreddy

I talked to my L.O. It's not "points", it's just bundled origination and "junk" fees. I guess 1% is normal orig. fee and around $1400 for "junk fees" they tell me is actually a little lower than most. Not a nice phrase. Maybe I heard him wrong.

I over-analyze everything but I just close my eyes and sign when it comes to mortgages. I can't argue with all the fees so I just try to turn a blind eye because they're so flippin high it makes me wonder if I need to second guess them all.

What an inefficient market. So between both parties, it costs what... 17% or so to exchange a house (with mortgages involved)? I know it's not like buying stock but wow. I'm sure if it could be done much cheaper someone would be trying it and it'd force it all down.

An agent friend tells me I stole this house and got a great situation overall and I need to pop a beer and relax and congratulate myself, not sweat the details.

It sounds like you got the usual and customary fee treatment. Your friend is right; the realtor/lender/title company money grab that surrounds a sale of property is sickening if you think about it for long.