As a Customer You Say--How Much Is It Really Costing Me?

I get this all of the time with customer's telling me "Well, they are only charging me ..."

Shortly after this it is is usually followed with "What is your best rate?"

and, lastly, my all-time favorite

"I do not pay closing costs!"

Once we look at the details it more often than not becomes quite clear some lenders do not disclose total closing costs as closing costs.

F.Y.I.

Normal Total Closing Costs = $2200-$3500 per $100,000 borrowed

Case in point, I had a customer call in the other day. He was dealing with his current mortgage company. He said "They are only charging me a quarter of a point to do this loan." After we got to talking that quarter of a point turned into much more as the loan was $374,000.

List of fees

Commitment Fee $ 575.00

Origination Fee .375 $ 1402.50

Tax Service Fee $ 79.00

Flood Certification $ 18.00

Application Fee $ 325.00

Mers (Electronic Registration) $ 5.00

Mortgage Release Fee $ 10.00

Mortgage Recording $ 69.00

Title Search Fee $ 275.00

Attorney Fee (Closing) $ 300.00

Document Delivery Fee $ 7.50

Title Insurance $ 611.00

Discount .25% $ 935.00

Appraisal (No Charge) ________

Total Charges $ 4612.00

Keep in mind as a valued customer he was only paying a quarter of a point in closing costs and was getting a free appraisal. This too was before any escrows which he wished to include. With a little more conversation, this little-to-no-cost loan was locked a half point higher than even a loan with "normal closing costs"was offering. His current lock was at 5.375%, and at $2800 in closing costs total (including an appraisal) on the day we spoke, he could have gotten a rate of 4.875% with him actually paying closing costs.

Loan amount $374,000 @ 30 years @5.375%=$2094.29 per month

Loan amount $374,000 @ 30 years @ 4.875%=$1979.24 per month

When evaluating closing costs one has to consider everything. Sometimes it makes sense, as a consumer, to pay no closing costs. However, many well intentioned borrowers are confused based on their own perception, previous transactions, or lack of knowledge. When considering a no closing cost option you should evaluate the following:

• How long do I plan to stay in this home?
• Am I expecting a large influx of money, ie, a settlement, or possibly an inheritance.
• Is this a home I need money to do work on and then try to sell?
• Would no closing costs make this loan work where closing costs included does not? (Example, taking from and adjustable rate mortgage to a fixed rate mortgage)

If you can answer yes to any of the above then a no closing cost option likely makes sense for you. My concern though is with consumers who refuse to pay closing costs as a general rule is that they do not fully understand those ramifications.

NO CLOSING COSTS EQUATES TO HIGHER RATES AND HIGHER MONTHLY PAYMENTS