Closing Costs seem so confusing, how do I figure out what they will really be?
Closing Costs are an unavoidable part of any mortgage transaction. Regardless of what you hear or see in advertisements, you will never avoid closing costs and lender fees. One way or another you pay them. (Click for the FREE MORTGAGE REPORT and see "No Closing Costs, No Way! The True Cost of 'No Cost', Flat Fee, and No Closing Cost Loans".)
A Good Faith Estimate of Closing Costs (GFE) is a document provided by the lender/broker which is intended to give you a pretty good idea of all the costs involved and the amount of money you will need at your closing (or "Settlement"). By law this disclosure must be issued to you within three days of the lender's/broker's receipt of your loan application. The most efficient way of shopping is to request one before applying so that you can compare lenders. You will still receive another after your application is submitted. If you have received both, it is a good idea to compare them immediately to determine if you are now seeing fees that the original person might have "overlooked".
Each cost is listed on a separate line, and each line is numbered to correspond with the numbered lines on the HUD1 Settlement Statement which you receive and sign at your closing. The Settlement Statement is a legal document which lists every penny involved in the transaction.
While all costs listed on a GFE should be reviewed and anything questionable addressed, the costs most important to you in your mortgage shopping are the lender fees or "Items Payable in Connection with the Loan". The costs are delineated on lines numbered in the 800's on your GFE. These are the only lender/broker fees connected to obtaining the loan and are the costs to be used in comparing lenders. All other charges shown are pretty much out of your control, such as Reserves, pre-paid interest, Title Charges, and Government fees, with the possible exception of the cost of a survey and pest inspection, found on lines numbered in the 1300's, for which you can shop. If in comparing GFE's, you find one where these other costs seem either much lower or much higher than most this should raise a red flag. Often times these are minimized on a GFE in order to make a lender's/broker's estimate look better than others in order to obtain your application. And if these figures look inordinately high, you might be dealing with inexperience or unfamiliarity with transactions in the area you are buying.
Note: In most parts of Florida, it is customary for the Seller of the property to arrange and pay for the Title Insurance, the exceptions being a few counties, or when you are buying from a builder, or your contract provides otherwise as negotiated. The buyer pays only for the Lender's Title Insurance, which should be issued at a reduced rate. There will still be other fees from the Title Company, but since you do not choose the company, you do not "shop" the fees. There is usually only slight variance in these fees. So, what can you expect to pay in costs and fees at your closing?