Hidden Costs
Closing cost chart
Who can pay?
Prepaid Items

For the most part, since these fees DO NOT originate at the mortgage company level they DO NOT VARY from company to company.
Closing Costs are fixed fees from third parties for performing services such as: furnishing tax certificates, transfer/recording fees to the county & state, doc prep fees, title insurance, surveys, appraisals, etc.

They come from 3 different sources:

Originating Mortgage company
Secondary Market Mortgage Investor
& the Title company

Some of these fees, like the appraisal, credit reports, etc. are usually paid prior to closing and credited to you at closing.

HIDDEN COSTS
(the unvarnished truth)

People are always worried about Hidden Cost sin a real estate transaction and I can't say that I blame them. Title companies tell us the average buyer gets to closing and is surprised with about $2,000 more in closing costs than they were told. Since it couldn't come at a worse time happenings like this lead to horror stories that are oft repeated and soon the $2,000 grows to $4,000 or even $5,000 in the telling.

With stories like this circulating how could you not be worried about hidden costs?

But how can misteaks like this happen over and over again?
You would think Realtors & Mortgage companies would eventually learn how much these closing costs really are. So the first question we have to ask ourselves is "Are these mistakes?" And the answer is a resounding "NO - they are marketing techniques". Let me explain.

I know how much closing cost are, Realtors know how much closing costs really are, every mortgage company in town knows how much closing costs are. So if they all know the actual figures, why not simply tell borrowers the correct figure?

Because it is legal to fudge!

The law says that Realtors/Mortgage companies can disclose as little as $1,000 of the closing costs. (and the law doesn't even mention the need to tell you about your Prepaid Items which can be as much or more than your closing costs)

OK, so even tho the law doesn't require it, if everyone knows the costs I still don't understand why they wouldn't disclose them. Wouldn't it be simpler and wouldn't they have happier customers? I agree with you and that is exactly what FINANCIER$ Mortgage does, but there is another aspect to this issue.

On a given day if 5 different mortgage companies had your loan completely processed and ready to lock & submit, all companies would quote you the exact same rate!
Any subtle rate differences would have more to do with the time of day the loan was locked or whether the lender had done a good job processing, if your situation was fully researched, documented and completely ready for presentation to the Underwriter than anything else. So the problem for a Realtor/Mortgage company becomes, if everybody's rates are the same how do we attract a borrower's attention and appear unique?

Lets face it, claiming to have lower closing costs is a good way to get your attention!

Mortgages can be complex and confusing so closing costs are one of the factors potential borrowers most clearly understand and focus on. "Understating" the closing cost figures is an easy way for a Realtor/Mortgage company to entice you to do business with them. As long as this practice generates business, companies will continue to understate. Companies that do this are not doing anything illegal, but they are being less than totally ethical & honest with you. When faced with this situation, the question you must ask yourself is "What else are they being less than totally honest about with me?"

Your only defense is a good education.

There really is no downside to a Realtor/Mortgage company understating costs. . . .
unless Buyers get mad enough to quit doing business with them why shouldn't they understate? Once you are at the closing table the Realtors/Mortgage companies know you won't let a little thing like $2,000 stand between you and your new home. After all you've already sold your old house/given notice at the apartment, moved your kids to a new school & told all your friends about your new house - THEY KNOW YOU WILL CLOSE!!

Let me explain closing costs to you so that you will know what to look for.
If you understand closing costs you will be able to spot the "understaters" on the phone. Listen carefully and you will hear them make statements like "OUR closing costs are only . . ." when in fact YOUR total out of pocket costs will be much higher.

When you look at the chart below you will see how the closing costs could be broken down at least 3 different ways and, if stated properly, people could underdisclose without actually lying and you might not catch it. So ask people point blank "What will MY TOTAL out of pocket costs be?"

And yes, as you'll see by the chart below, costs do fluctuate slightly, but only slightly.
For example, a special loan program might require a review appraisal. An appraisal & survey on 10 acres in the country costs more than a survey on a city lot - but you will only find a $50 variance here and $25 there, not $2,000! You will also see that costs come from 3 different sources - make sure any closing cost quotes you get include costs from all 3 sources.

FINANCIER$ will be happy to tell you the total of ALL your closing costs, We don't control them and except for the Origination fee we don't get a dime of them! Any closing costs that come thru us are Recovery Costs, which means they are either for bills we have already paid or will be getting billed for. Since I hate being yelled at when I'm wrong it is easier to be honest.

If you want to confirm closing cost estimates, talk to a Title company, they'll tell you the truth.
Show them the estimates you have been given and ask which is more accurate. The Title company loves for you to have accurate figures because, since it is rare for a Realtor (and unheard of for a mortgage company) to attend closing they are the ones left holding the bag and dealing with the screaming Buyers and Sellers.

FINANCIER$ loan officers are required to give you as accurate figures as they can and we attend every closing possible - just one more way we stand out from the crowd.

While we are at the closing we check the closing statement for accuracy and make sure you understand the closing process and the paperwork. Our presence also puts us right on the firing line if we made a mistakes - so we strive for accuracy.

Below is a list of the fees for a typical house, in a subdivision, in the DFW area:
(note where the charges originate)

The law says if I break out the costs, as I did in the example above, I must give you the cost range of each individual item. BUT when I total these figures I am allowed to ignore this price range and give you a accurate figures if I know them. So ignore the dollar figures in each box and look at the totals I have furnished below.

We poll area title companies monthly and have found that Buyer's closing costs

• in the D/FW area

• on a 30 year fixed, Conforming loan ($417,000 or less)

run approximately $2,200 + 1% of the loan + any points + your prepaid items.

So for a $100,000 loan the costs would be:
$2,200 + 1% loan origination fee ($1,000) + Points (usually $0) = $3,200

Don't forget you will also have to pay your Prepaids (taxes, insurance and interest). Unfortunately we cannot be so accurate on prepaid costs. It depends upon what day of the month you close, taxes on the property and how diligently you shop for insurance*. When it doubt we try to over-disclose which is why most of our customers need less money at closing than we've told them.

*FYI: The state DOES NOT set the insurance rates so you CAN get lower insurance rates. If we are doing your loan we'll tell you how.

(For more information on points see Reading & Controlling Rates)

VA closing costs are about $900 lower for the borrower.
Does that mean VA is cheaper? NO, the costs still exist, some have just been shifted to the Seller's side. This means that either the Seller nets less on a VA sale or, more likely, they sell it to you at a higher price than if you had bought the house using any another type of mortgage.

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Don't worry, I haven't forgotten about your Prepaid costs, I have just saved them for the next page.

CAN THE SELLER PAY MY CLOSING COSTS?

A commonly asked question is How much of the closing costs may the Seller pay for me?
Before you trod too far down that path you have to understand that Sellers have closing costs also. Many Buyers think that only the Buyer has closing costs but, the Sellers costs are almost as much as the Buyer's costs and Sellers costs will be much more if there is a Realtor's commission involved! So some Sellers may be reluctant to pay your closing costs unless you approach them properly.

Now back to your question, all loan types have some sort of minimum out of pocket expenses required of the Buyer. They want you to have enough of your own money invested into the house so that you are not likely to walk away if the going gets tough. So this means the Seller can't pay all of your costs, but he can pay some.

The normal Seller contribution limits (including points) on a Conventional loan are 3% of the sales price on 97% & 95% loans and 6% on all others. The Seller may NEVER pay any of your PREPAID items except for Mortgage Insurance. Even if the Seller pays all your closing costs you will still have to come out of pocket for the downpayment and prepaid items.

3% of the sales price will usually cover all your closing costs and 6% is enough money to also pay several points to lower your interest rate.

The seller can pay all of your costs on a VA loan. But that usually means a much higher sales price.

FHA's formula for downpayment ensures that the seller is never actually paying any of your closing costs.
Remember this when you are talking to builder! Because of the way the downpayment formula is figured, it can be stated that the Seller is paying your costs, but what is actually happening is that for every dime the Seller pays of your closing costs your downpayment has been raised a dime!