Save Thousands on Your Next Mortgage

Closing cost include all fees and charges necessary to process, approve and close your mortgage loan for your purchase and refinance.  The best way to understand closing costs is to review the charges

The new Good Faith Estimate of Closing Costs divides fees and charges into two main categories: The mortgage lender’s fees  are called “Adjusted Origination Charges” and the fees of all other settlement service providers which is called “Your Charges for All Other Settlement Services.”

Dividing these costs into these two categories gives mortgage borrowers the ability to compare mortgage lender offerings and fees specific to the mortgage lender. The items in these two categories of charges are detailed below.

Part A – Your Adjusted Origination Charges

1. The origination charge

This charge is for getting this loan for you. If you are working with a mortgage broker, their fee would go here. If you are working with a lender there may or may be a charge on this line.

 

2. Your credit or charge (points) for the specific interest rate chosen

 

This section may be confusing for mortgage borrowers because it will either be zero, an additional charge or a credit back to the borrower at closing.

If that number is zero, then any origination charge in number one if there is one is your total origination charge.

If the amount listed is an additional charge, it is added to the origination charge. If the number is negative then subtract it from the origination charge to get net costs. In some cases, you will see a credit that is higher than the origination charge. In this case, the negative number will be applied to offset the cost of your settlement charges.

For example, if origination charge is $1,000 but your credit is $2,000, then the mortgage broker or lender will get $1,000 for originating your loan but you will get $2,000 credit toward your other closing costs.

 

Part B – Charges for all Other Settlement Services

“Other Settlement Services” are charges required to obtain your loan and that are provided from other service providers such as title companies. These charges include as shown on the Good Faith Estimate in this section:

3. Required services that we select

This includes appraisers, flood certification companies and credit report companies.

4. Title services and lender’s title insurance

This charge includes the services of a title or settlement agent, for example, and title insurance to protect the lender, if required.

5. Owner’s title insurance

Owner’s title insurance is the additional title insurance charge that borrowers may purchase an owner’s title insurance policy to protect their interest in the property.

6. Required services that you can shop for

These charges are for other services that are required to complete the settlement. The lender can identify providers of these services or you can shop for them yourself.

7. Government recording charges

These charges are for state and local fees to record the loan and title documents.

8. Transfer taxes

These charges are for state and local fees on mortgages and home sales. Not all state have this charge.

9. Initial deposit for your escrow account

This charge is held in an escrow account to pay future recurring charges on the property and includes all property taxes, insurance and mortgage insurance if any.

10. Daily interest charges

This charge is for the daily interest on your loan from the day of the settlement until the first day of the next month or the first day of the normal mortgage payment cycle. This amount is shown as a daily charge and will vary depending on the day of the month that you close.

11. Homeowner’s insurance

This charge is for the insurance you must buy for the property to protect from a loss, such as fire. Borrowers are free to obtain homeowners insurance from any provider but they do need it for closing.

Items three through eleven are all costs that are not controlled by the lender which is why they are separated from the origination charge.

To accurately compare mortgage lender offerings, start by making sure that the loan summary data on page one of your Good Faith Estimate (showing rate, points payment etc.) are the same. Then compare Part A Origination Charges among lenders with the same product offering to accurately compare loan programs.