Understanding Closing Costs on a Refi

[Jay C.]

Hi all,

I'm looking to refinance and I just want to understand the Closing Costs and Cash to Close details. The estimate of the Closing Costs and Cash to Close are wildly different in the Closing Disclosure that I'm looking at.

Questions:

1) Cash to Close was $871 in the loan estimate, but it's now $5,808 in the Closing Disclosure. The lender stated that this is due to the Total Closing Costs (J) jumping from $7,771 to $10,309.99.

When I look at the D+I it was $2,434.60 + $8,394.80.

The F. Prepaids has a property taxes of 6 mos = $1,1516.84, but the G. Initial Escrow Payment at Closing also has a Property Taxes at $432.52 per month for 12 mos (total = $5,190.24)

This doesn't seem right.

2) Is it common for the Closing Costs mount $10,309.99 to be rolled into the total loan? I wasn't looking to increase my loan.

I know there was an article or post that someone made with detailed answers on this, but I can't find it for the life of me!

Thanks

[Merritt Noel]

Working in the industry the Closing Disclosure can be a little misleading.  However, to have your inital cash to close jump from $871 to $5,808 without any real explanation or discussion to explain the reasoning would be very frustrating.

To answer your questions:

1. obviously the difference between $7,771 and $10,309.99 does not add up to $5,100. its actually $2,538.99

1.1   Link F will only show property taxes that are due in the coming month or two. And therefore are broken out from section G which shows what needs to be collected to fund new escrow account.  You can easily look up what the property taxes are online and if there are outstanding taxes due. And when your next installment will be due...this should help shed some light on the discrepancies you are seeing on the CD.  

2. As for total closing costs upwards of $10,000 that is a difficult question to answer as everyone's situation is different.  Any time closing costs change by that sizable amount someone (most likely) the LO did not do their due diligence.  And it sounds like they are also afraid help you understand what exactly is going on.  I do not remember the last time my closing costs for a client ever were more than $1000 higher than what I initially disclosed. But I am also very detailed oriented and make sure everything is dialed in from the get to.  

Personally, I would ask for a detailed walk through of why the costs changed. Specifically, why they are collecting over $6,400 in property taxes alone. That is a sizable amount of money and increase to new loan size.  If there are past due taxes that need to be rectified that would make sense.  But you still also have the different amounts listed for property taxes which need explanation and to be double checked by the closer who worked those figures.  

I hope this provides you a couple talking points as you have ever right to fully understand why the drastic change in cash to close in addition to why they are collecting 18 months of taxes with varying tax figures.  Good Luck and look up your property taxes online so you have that information ready when speaking to them.