GFE and Closing Costs are confusing me

E

escrowbear

New member
I'm trying to analyze the GFE and compare apples to apples, but I'm getting confused.

What is an "Origination Fee" and why does it cost $3600?

Under Title Charges, is this normal?
Settlement Fee : $1700
 
Origination fee is what they are charging you to originate your loan.  It's mostly profit (covering some of their cost as well).  $3600 sounds way too high depending on what are the other fees.  $1700 settelment fees sounds reasonable.  These are the fees paying either title or escrow.
 
escrowbear,
Very simple to compare apple to apple - thanks to the new RESPA rule to protect consumers from confusion.  Get quotes on the same interest rate, same points, same day, same time, and just look at box A "Your Adjusted Origination Charges" and compare.
 
Settlement fee is another word for Escrow. If you've not gone to contract yet, the Settlement Fee is simply an estimate at this time. It's also not a certain cost that the lender has quoted. Many escrows have an "escrow fee" plus many other fees that are not always lumped into their settlement fee, but are part of the total settlement charges. The lender does not control this cost and should not be used for comparison purposes.

The 2010 RESPA law changes require lenders to show an Origination Fee, then discount that fee depending on the rate. The Origination Fee is comprised of several costs so it's not always what was known as "Points" in days gone by. You might find that for a $300,000 loan, you'd have a $3000 Origination Fee, then a lender credit based on the rate your chosing for $3000 which means your rate is 5.0% but your cost is zero. If you are discounting your rate, you might have 4.750% for a $3000 Origination Fee, a $1,500 credit from the lender, which means that 4.75% is costing you 1/2 point.

Yes, it's confusing, but that is the world view you have to work within to get some kind of comparison of rates and terms. Even after you've gotten the quote your rate is not yet locked. Rates change hourly sometimes so 5.0% at -0- points quoted at noon might be 4.875% for -0- (YAY!) at 3:00 PM or 5.125% later that day (BOO!)

.125 in rate is real money, but working with a lender who can get your loan approved is even more important to shop for. The board is rife with stories of last second issues popping up during escrow. Some lenders can work around these issues, many don't however which can kill a deal quickly.
 
sgip said:
Settlement fee is another word for Escrow. If you've not gone to contract yet, the Settlement Fee is simply an estimate at this time. It's also not a certain cost that the lender has quoted. Many escrows have an "escrow fee" plus many other fees that are not always lumped into their settlement fee, but are part of the total settlement charges. The lender does not control this cost and should not be used for comparison purposes.

The 2010 RESPA law changes require lenders to show an Origination Fee, then discount that fee depending on the rate. The Origination Fee is comprised of several costs so it's not always what was known as "Points" in days gone by. You might find that for a $300,000 loan, you'd have a $3000 Origination Fee, then a lender credit based on the rate your chosing for $3000 which means your rate is 5.0% but your cost is zero. If you are discounting your rate, you might have 4.750% for a $3000 Origination Fee, a $1,500 credit from the lender, which means that 4.75% is costing you 1/2 point.

Yes, it's confusing, but that is the world view you have to work within to get some kind of comparison of rates and terms. Even after you've gotten the quote your rate is not yet locked. Rates change hourly sometimes so 5.0% at -0- points quoted at noon might be 4.875% for -0- (YAY!) at 3:00 PM or 5.125% later that day (BOO!)

.125 in rate is real money, but working with a lender who can get your loan approved is even more important to shop for. The board is rife with stories of last second issues popping up during escrow. Some lenders can work around these issues, many don't however which can kill a deal quickly.
Click to expand...

Thanks for the detailed explanation, just wondering, what kind of last minute issues could pop up? any idea about the most common issues arises during last days of closing.
 
There are tens of thousands of ways escrows can collapse at the last moment. Really, there are.  An escrow company nearly cratered a deal for me this week. Here's the reason: When transactions open, we send out the 2010 Good Faith Estimate to our clients AFTER the escrow sends us an Estimated HUD-1 (closing statement). that HUD-1 must show all costs that the buyer might pay. Flash ahead to the day of closing. Escrow sends us a revised HUD-1 with almost $1,500 in new, undisclosed fees charged to the buyer. We couldn't close on the deal (neither could escrow BTW) because it violated the original 2010 Good Faith Estimated costs. Escrow had forgotten about a few costs and tried to slip it by at closing. We refused to fund as someone - not us in this case - had to "eat" those costs. The Realtors called and dropped a B-52's load of F-Bombs on us for not closing, but it wasn't our issue.

The Escrow had to eat those costs, after much arm twisting, and we closed today.

With roughly 40 individuals and 10 or so companies working just on the buyers side transaction alone, one person is bound to screw up. I've done it, and expect others to do so as well. It's human nature to overlook, over estimate, or simply bungle complex multi sided deals.

My .02c

Soylent Green Is People.
 
thanks, now these kind of BS things definitely not in buyers control until unless they r ready to pay these last minute fees and definitely i have heard these kinds of stories where buyer has to pay little more in the end. but do u think it's worth not to close and strart all over again. or u r just following the law because final GFE is already generated and cannot be changed prior to closing.
 
I don't understand the question.

With the changes in the 2010 GFE, the deal cannot close because the buyer won't be hit with any last moment fees. The Government rules now say if the fees differ and exceed certain tolerances, either the lender or the escrow must eat the cost. The times of bait and switch are coming to a close.

It's not best to cancel because you could be switching one problem for another. Also, the seller isn't going to be that enthusiastic about having you the buyer start again from scratch.

Hope these answers help clarify your question.
 
sgip said:
I don't understand the question.

With the changes in the 2010 GFE, the deal cannot close because the buyer won't be hit with any last moment fees. The Government rules now say if the fees differ and exceed certain tolerances, either the lender or the escrow must eat the cost. The times of bait and switch are coming to a close.

It's not best to cancel because you could be switching one problem for another. Also, the seller isn't going to be that enthusiastic about having you the buyer start again from scratch.

Hope these answers help clarify your question.
Click to expand...
yes, that's what i was looking for? my thinking was, if the added fees r 1000-1500, more then the allowed ones then is it worth cancelling the whole deal and start all over again. now if buyer cannot pay these fees and lender/escrow also not ready to pay then what to do, now both buyer and seller r at the losing end. can seller eat these costs or what's the better way to handle it?
 
octrends said:
sgip said:
I don't understand the question.

With the changes in the 2010 GFE, the deal cannot close because the buyer won't be hit with any last moment fees. The Government rules now say if the fees differ and exceed certain tolerances, either the lender or the escrow must eat the cost. The times of bait and switch are coming to a close.

It's not best to cancel because you could be switching one problem for another. Also, the seller isn't going to be that enthusiastic about having you the buyer start again from scratch.

Hope these answers help clarify your question.
Click to expand...
yes, that's what i was looking for? my thinking was, if the added fees r 1000-1500, more then the allowed ones then is it worth cancelling the whole deal and start all over again. now if buyer cannot pay these fees and lender/escrow also not ready to pay then what to do, now both buyer and seller r at the losing end. can seller eat these costs or what's the better way to handle it?
Click to expand...

Typically, the GFEs I see are "padded" so that quite the opposite is the case.  The actual fees usually end up being less than the guestimates and the buyer is cut a check after closing for the excess funds.  Escrows work smoother when they don't have to come back to anyone for some extra $$$ at the finish line.  Good lenders (like SGIP) help make sure that happens.

I also want to reiterate that the lenders with availability, communication, and attention to detail distinguish the good guys from the rest.  Working with someone who gives you real timetables and helps manage expectations makes it much easier for everyone else to do their jobs.

-IrvineRealtor
 
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