Closing Costs: What, How Much, To Whom, and Can I Avoid Them?
Shopping for interest rates is easy compared to comparing closing costs. I’ll try to help you interpret closing cost worksheets, so that you’re comparing the apples to apples when pitting us brokers and lenders against each other.
First things first: Don’t compare the bottom line.
On most fee worksheets there’s a bottom line figure that shows a final amount of cash needed to close. This figure takes into account the following and more:
- Down payment
- Earnest money
- Escrow estimate
- Estimate of homeowner’s insurance premium
- Best effort guess on annual property tax
- Estimate of legal fees:
- Closing fee
- Lender’s title insurance
- Owner’s title insurance
- Per diem interest
- Recording fees
- Transfer tax
- Intangible tax (this tax is very tangible…)
- Appraisal fee
- Credit report fee
- Underwriting fee
- Any discount points or lender credits.
- Processing fees
Out of all these, the broker or lender only controls the last 5. (This won’t be the last time I mention this, but we don’t charge any of those last 5 fees). All the rest are going to be best guess estimates by your loan officer. Now, I’m pretty good at this, and a lot of loan officers are just as good, but the even if you took away lender-specific fees, no two LOs’ estimates are going to be the same. You may see differences of up to a thousand dollars in some transactions. So, this bears emphasizing:
Only compare lender-specific fees!
Get your lenders to all quote you the same rate (remember from our discussion of discount points or lender credits that changing interest rates is easy) and then compare the net lender-specific fees from there. Make sure to count any lender credits as a negative fee.
Why aren’t there underwriting, appraisal, credit report, or processing fees on ATL Mortgage fee sheets?
We either pay it for you or don’t charge you. This process should be simple.