How do I get low closing cost? What is title insurance? How much is Recordation tax?
When choosing your lender, you need to look for more than just the lowest interest rate. The cost to attain a particular rate is of equal importance. A while back I wrote an article about how to identify junk fees and eliminate them. Now I want to address the rest of your Good Faith Estimate. These items will include Attorney's fees, title insurance and all applicable taxes; such as recordation tax and transfer tax and prepaid expenses (escrows).
I cannot stress more that YOU can determine these fees by selecting your own title company and not the one picked by your lender. When I supply a good faith estimate, I use average fees for the area in which the property is located. These figures will not be exact. You have the choice to allow the lender to choose your settlement agent or you can do it yourself. The benefit of letting the lender choose your agent is the familiarity that the lender has with the vendor. I am far more likely to have an attorney that depends on my business be more flexible (i.e come to your home at 8 pm for a closing) than one that I do not have a business relationship with. The downside is that they may be slightly more expensive than the internet company that Google directs you to. My recommendation is to shop your business online and then ask the lenders title company to match the closing cost quote that you get on your own. This will give you the best of worlds: the lowest cost and best service.
Another area of question is title insurance. What is it and why is it so expensive. It is often the most costly part of your refinance. Let's start with "What is title insurance?"
Title insurance is exactly what the name suggests; it insures the title of your land and home. This is necessary because the title of your land has probably changed hands several times in the past. Let's say that somewhere along the line there was a forged signature, or an unpaid lien. Title insurance protects the insurer in these instances.
Is title insurance required? : YES. If you have a mortgage, the lender will require this in all instances. It is noteworthy that this is an indemnity policy, so it only protects the lender against their losses and does not protect the mortgage holder in any way. Clearly the insurer would not issue a policy if anything was amiss, so you should be ok.
How much does title insurance cost? It depends on what state the property is located in. Typically, the cost will be .5% of your loan amount. On a $400,000 purchase loan, the cost would be about $2,000. When you refinance, you will get a "re-issue" rate. This is typically 60% if the original amount. The cost for insurance can vary from one provider to the next. This part of shopping around.
The next expense that you will see is your pre paid insurance, property tax and interest. While these fees are completely non -negotiable, you should understand how the amount collected is determined. The biggest number will always be your property taxes. When I do a preliminary good faith estimate, I always estimate that we will collect 6 months in property taxes. If a lender is showing less than this, you should ask why they are. It is possible that they have done the diligence of calculating the exact amount of months to be collected in escrow. It is more likely that they are short changing that figure to make the bottom line look smaller than it actually is in order to "earn" your business. It is also possible that they would inflate the escrow figure so that they can add junk fees at the end of the transaction. The average consumer only cares about the bottom line. I'm telling you to pay attention to every line and hold your lender accountable. At the same time, remember that a good faith estimate is only an estimate. There is room for error within reason.
Please feel free to contact me with any questions about the mortgage process. I will be more than happy to provide you with a no obligation Good Faith Estimate.
Allow my experience to be your resource!
For updated USDA, FHA , VA, Conventional and Jumbo mortgage rates go to www.joshburley.net .
Want to make sure you are getting the best interest rate? compare my interest rates to Quicken Loans, Bank of America, Wells Fargo, SunTrust, ditech, Citimortgage, Navy Federal Credit Union . You will see that my rates are 2nd to none. Work with a LOCAL MORTGAGE LENDER that is commited to giving you the best rate and service!