One of the worst questions a customer can ask when determining which mortgage company to use is "what are your closing costs?" Too often, when customers are estimating what their closing fees are going to be, they ask the above question. While the Good Faith Estimate (GFE) is designed to prepare them for the expenses involved with purchasing real estate or refinancing a mortgage, some lenders have found a way to work this to their advantage.
Closing costs are broken into four broad categories; lender fees, title and attorney fees, government recording fees, and pre-paids and escrows (interest, taxes, insurance, etc.). Three of these four broad category of fees (title and attorney fees, government recording fees, and pre-paids and escrows) will be the same no matter which lender the customer chooses - despite what each lender estimates them to be. Only the lender fees will vary. The problem arises when customers fail to break their costs down.
Example: A customer calls two different lenders and is told by both that closing costs will be around $4000. Lender A estimates that Title, Recording Fees and Escrows will be about $3000, while lender B estimates them to be $3500. In the end, because title, recording fees and pre-paids will be the same regardless of the lender, lender B will actually end up being $500 cheaper.
The bottom line is you want to compare lender fees which are in the 800 series on the Goof Faith Estimate.
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