How to compare closing cost w/ different lenders

Question

So with refinancing my rental, I'm finding it easy to compare the simple stuff: rate, points, ltv.  Next level stuff for me will be the closing cost.  Some lenders have provided me a complete list (see image below).  In that example, is that straight up all the cost I would be looking at? Or are the hidden cost/fees that I should be looking for?  Should I just be asking all the lenders I'm getting quotes from to give me a complete closing cost list, and that way I'll have all the info?

Account Closed · Answer

When I was a loan officer we had to provide an estimate of closing costs and if they varied between the time of quoting  and the time of closing we had to account for the differences. I'm sure the laws are far more restrictive on that now than when I was doing loans. Look out for "Junk Fees". You can ask to see a preliminary HUD to see what the bottom line is. If you are familiar with a HUD (It is a closing statement, they have a new name for it now, so just ask for the closing statement estimate) I don't use banks or mortgage lenders since I only do Subject To and Wraps, but I seem to recall hearing that fees are highly regulated and have to be disclosed prior to closing. It makes sense, because loan officers can have a loan "blow up" if there are add-on fees that make the borrower mistrust them.

Stephanie P. · Answer

You can contact title companies and ask for rates etc...Most people use title companies their lenders recommend, but the lender is supposed to provide a list of a few and you can pick.  On the commercial side, we just say, "that title company is really investor friendly" and the borrowers tend to use them.  Your title company should be able to let you know about how much the lenders are going to require in escrows as well.

Yes, if the lender has included the title fees in their quote to you, it's a guess based on past performance.  Many times, they'll use an expensive title company to quote fees from and then use a different title company that's cheaper so they don't have to redisclose after the CD has gone out.

Some lenders won't work with certain title companies because they may have been slow getting trailing docs or sending closing packages or they don't follow instructions.  I know we have one or two that we will not accept title work from because of past performance and if the borrower insists we use that title company, we won't do the loan.  I've had title companies purposely send checks for thousands of dollars regular mail rather than wiring fees.  We won't work with those companies or attorneys again.

Trust your loan originator to help you through, but don't be afraid to ask the companies directly.

Best of luck

Stephanie

Stephanie P. · Answer

There are a variety of different places that fees come from.  Your lender should be able to let you know what their fees are, but if you want really accurate fees from the other places, you're going to have to have your team in place that will give them to you.  You have to know how much your title company is going to charge and you're going to have to know when your municipality collects taxes for escrows.  You have to know how much that specific property is going to pay in taxes and insurance to know exactly how much your escrows will be.  Appraisals vary, but you can figure on 450 to 650 if it's an investment property and they have to do a comp rent analysis.  Have a preferred title company that can give you a pretty accurate estimate before you go to the lender.

Ryan Moore · Answer

The name of the document that replaced it is called the Closing Disclosure.

1) For anyone that knows, will a lender provide me a Closing Disclosure before I apply?

2) If not, then do I just ask for a breakdown of all closing cost estimates?  The picture I tried posting above shows that this one lender sent me closing figures including 11 line items (lender processing, appraisal, title insurance, etc.)

3) When I am ready to pull the trigger on my refi, should I just apply to all the lenders that were within the same ballpark and get their disclosure so I can do as much of a apples to apples comparison as possible?  Am I right to assume that having my credit pulled many times within a few days of eachother for the purposes of acquiring a mortgage will all be classified as one inquiry?

Ryan R. · Answer

Most lenders will want a credit pull, income info and have a property address to generate a LE (Loan Estimate) due to the fact that for a 30 period they must remain within a 10% tolerance of this quote for all fees quoted or else they will have to eat those fees, unless there is a valid change of circumstances, in theory they need to have an accurate FICO, DTI and good ballpark value to determine the LTV for pricing purposes on the quote.

Most lenders will provide a "Fee Worksheet" that doesn't have the same requirements as an LE, this should provide you with fairly accurate fees that can be compared. For comparison purposes, do not pay too close attention to the pre-paid items or the escrow portion of the fees as in the end they will all be the same, just figure out who has the lowest Lender/Title fees and then once you narrow it down, have the LO's explain the escrow portion, I say this, because a newer less experienced LO will "just let the computer figure it all out and a lot of times on the estimate they will just use generic figures like 6 month taxes and 6 months insurance, however, this is not going to be accurate, these should be based on when the next due date is and a reasonable pad (2-3 months is standard for this pad). For example, if you close your refi in Aug, as your insurance is paid in July, then you should only have between 2-4 months of insurance escrowed, remember you only make 10 payments the first year of a mortgage and is the reason for the 2-3 months pad, one month for the difference of when due and loan closed and 2-3 months for the pad depending on the lender requirements, same basics for calculating taxes. This is where you can start separating the good LO's from the mediocre ones, if they can't explain or calculate in a manner that is easy to understand then they will more than likely have trouble during the refi experience as well and you are probably going to have a headache during the time it takes to close the refi.

You will most likely never receive a CD "Closing Disclosure" until you have an approval issued because this is a disclosure of the final fees to be charged and also has a small variance that has to be adhered to allowing for only small variances like messenger fees or additional recording costs not anticipated.

Ryan Moore · Answer

Thanks for the insight.  I've never thought about reaching out to title companies in my previous lending situations.  I usually just use whoever the lender is using.  So if I'm understanding correctly, I can contact title companies just like I was doing for lenders, and I would be asking them about their cost if I were to involve them in my refinance?  And they can help me to understand the money I would need to bring to closing that involves items like taxes and insurance?  Granted, I own the property so I already know about those cost and when they are due, but they will tell me the amount I will be asked to bring to close.

Also, what does it mean when a lender has included title fees in their quote to me?  Are they basing that off a title company they use?  Is it just some generic/not very accurate number?  Do any lenders make you use their preferred title company or can I always bring mine own to any lender?

How to compare closing cost w/ different lenders

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