Lending and Closing Costs

[Sean Conners]

First time posting and first time home buyer. I'm about 3 or 4 days from closing and I reviewed my closing disclosure and I've come across a problem. I'm taking out a VA loan, And the lender I have now has my final closing cost at $10,789, and out of pocket $4149, with 3.75% buying .6 points ($1090). After looking at the section a. Origination fees I've got $295 for administration fees, $575 for processing fees, $995 for underwriting fees. $100 Doc prep fee. Just wondering if this normal? Feeling it's all adding on the same thing. I talked to another lender saying he charges none of that. Estimated me at closing costs $8,078, out of pocket $565, with 3.375% no points bought. Which would significantly change the cash to close. Wondering if anyone knows about working with VA Loans and lenders in NC? Is backing out on my current loan officer so close to closing messed up?

[Chris Mason]

Originally posted by @Sean Conners:

First time posting and first time home buyer. I'm about 3 or 4 days from closing and I reviewed my closing disclosure and I've come across a problem. I'm taking out a VA loan, And the lender I have now has my final closing cost at $10,789, and out of pocket $4149, with 3.75% buying .6 points ($1090). After looking at the section a. Origination fees I've got $295 for administration fees, $575 for processing fees, $995 for underwriting fees. $100 Doc prep fee. Just wondering if this normal? Feeling it's all adding on the same thing. I talked to another lender saying he charges none of that. Estimated me at closing costs $8,078, out of pocket $565, with 3.375% no points bought. Which would significantly change the cash to close. Wondering if anyone knows about working with VA Loans and lenders in NC? Is backing out on my current loan officer so close to closing messed up?

A lot of banks and direct lenders have ridiculously juiced up profit margins on VA loans. You saw 4% or 3.875% advertised for conventional 20% down, so you got excited when you saw 3.75% with 0% down, not knowing that low 3s is where the market is actually at for VA. 3 or 4 days before closing is too late to switch, you wouldn't be able to honor your contractual obligations with the seller (who cares not a wit for your interest rate).

Targeting veterans and those using FHA loans to put extra profit in the bank's middle management vacation & slush fund was a big part of why I left the banking / direct lending world.

This is unfortunately common practice, and lawful for banks to do.

I will give credit where credit is due. The 2nd largest mortgage bank in the country (#1 is Quicken) targets FHA for super high profit, but not VA. Sucks that they shaft FHA borrowers, but at least they aren't screwing the veterans....

Pragmatically, Sean, I'd suggest juicing that rate up to 4% or so to eliminate as many of the closing costs as possible. It's too late to switch lenders, but at least you can minimize the closing costs; now that you've figured out how this works, there's no point paying points or closing costs for a loan we both know you're going to refinance in six months, is there?