Anytime you apply for a mortgage loan you will have closing costs associated with the loan.  There are a few factors that come into play in figuring out your total closing costs.

Here are the list of factors that will determine the closing costs on your mortgage loan:

• Loan Amount -The size of your loan can determine the amount of some of the costs.  Typically, a broker will charge an origination fee and if this fee is 1% of your loan amount, the difference in the loan amount will affect your total closing costs.
• Interest Rate - You have the option of paying extra closing costs to reduce your mortgage rate.  Depending on how low you want buy down your rate, will determine how much more your closing costs will be.
• Title Company -Generally, your title company fees will be determined by the area in which you are buying.  (or where the property is located if you are doing a refinance)  Some states will base their title insurance on the loan amount, where other states may have a flat charge, regardless of your loan amount.  Some states also have state stamps and various recording fees when recording your mortgage.

Recently, I posted about closing cost credits and how to get the seller to pay for these.

I’m licensed to do mortgage loans in Wisconsin and I’ve taken the time to draft up a Good Faith Estimate and Truth and Lending document for you to compare with any mortgage quote you get in the future.  Keep in mind this is for a specific type of borrower and a specific loan scenario.  Estimates can vary.

Good Faith Estimate Example

Truth and Lending Example

I understand every state will have different closings costs, but hopefully this give you a blanket idea of where all costs come from.

Also, if you are in the process of looking for a home loan in Wisconsin, feel free to contact me for another mortgage opinion.

We will continue to write more about mortgages in the coming weeks, since mortgage refinances and first time home buyers are where most of our recent questions have come from. Since mortgages rates continue to be at historic lows and first time home buyers that purchase a home by November 30th will receive a $8000 tax credit, these two things alone have stirred the mortgage craze lately.

When you are buying a home, regardless if it’s your first home or your 8th home, you are allowed to have the seller pay for your closing costs.  As a buyer in this type of market, you have a better chance of the seller paying for some, if not all, your closing costs.  All you need to do is  include the total amount of your closings costs into your offer to purchase contract.  If you are not entirely sure how to do this, then let your real estate agent know you are thinking about doing this.

Now, if the seller says they do not want to pay for your closing costs, then all you have to do is show the seller he or she will not loose any of their bottom line if you increase the purchase price enough to cover all of the closing costs.

Example:

Let’s say the you are offering $200,000 for the purchase of this home you want to buy.  Your total closing costs for the mortgage is $1900.  Offer the seller  a purchase price of $201,900.  The seller will than gladly pay for your closing costs, because his bottom line does not change.

Yes, essentially you are paying for the closing costs over the life of the mortgage loan, but the point here is that less money has to come out of your pocket at closing.  Can you think of a few good things to buy for your new home with $1900?

Keep in mind that the lender allows up to 3% of the purchase price for the closing cost credits.  In some cases, the cap is 6%, but it’s normally 3%.

Example:

On a $200,000 purchase price, the maximum closing cost credits would be $6000.  ($200,000 x 0.06 = $6000) 

A way to use these closing cost credits to the fullest extent is to use the extra money to buy down the interest rate.  Depending on home much it costs to buy down the interest rate, you could save $50-$100 more on your mortgage payment!  Not to forget about the amount of interest you will save over the life of the loan when the interst rate is lower.

This kind of thing has been around for awhile, but since we are see more and more people starting to buy homes again, we thought a little refresher would help.

When being quoted a rate and closing costs for your mortgage loan, do you ask for these numbers in writing? If you do, and I hope most of you are doing this, you will get a copy of the Good Faith Estimate (GFE).

As an example, a Wisconsin mortgage loan will have the following fees regardless of what company you choose to work with:

- Appraisal Fee – $275
- Credit Report Fee – $11 (this one can vary a few dollars)
- Underwriting Fee – $699
- Total Title Fees – $525
- Recording Fee – $75 (this one car vary a few dollars)

**Please keep in mind all these fees could vary with a different company, since all mortgage companies use different third party services.

If these specific fees are any higher than what you have been quoted, you need to get another opinion. Perhaps I could help, since those fees are what I can normally offer.

But you are reading this to find junk fees when being quoted closing costs. Well, here they are in no particular order…

1. Broker Fee
2. Application Fee
3. Administration Fee

That’s it folks! These fees should not be in your quote or in your final paperwork. How come? They are extra fees a company tries to charge for no particular reason to try and make extra money off of you. You may find an origination fee and processing fee when necessary, but these other fees are NOT necessary.

If you feel you are being charged junk fees with your mortgage financing, feel free to ask me about what should and shouldn’t be charged. While you are at it, let me give you a second opinion!

Click here if you would like me to contact you today!