The Bite of Fees in Refinancing
I recently refinanced my mortgage. I used bankrate.com to locate a broker.
The good faith estimate came and the fees were a bit higher than what I found on Bankrate but it was still a great deal.
The closing comes and the fees are (surprise) higher than originally quoted. I was stuck as the fees that where already out of pocket dwarfed the saving of dropping the deal and starting over.
What to do?
1) Get the broker or mortgage company to give you, in writing, which fees you'll be stuck with if you don't close.
2) Get the mortgage broker to give you firm quotes for the fees.
A lot of the excuses were around title insurance and such. I got quotes but they were in the ballpark of the good faith estimate or higher so I passed. There is no reason that these quotes can't be made firm.
Learn from my troubles.
If you are refinancing your primary residence, threaten to close and rescind. By law, the mortgage broker must refund 100% of all fees even if they are due a 3rd party. Your broker will probably negotiate the fees rather than have you walk from the transaction.
A Good Faith Estimate is simply that, an Estimate. Always take the time to get several quotes, compare the quotes and demand to know from brokers why the fees differ. Make sure one of the quotes is from a LOCAL lender. An out-of-state broker simply doesn't know the local market.
Getting quotes from several lenders allows you to determine that you are comparing apples to apples. A single family appraisal cost significantly less than an FHA multi-family appraisal. If you change the product, you change the pricing, a good broker will tell which fees may vary.
If the broker tells you that you must use a specific title examiner, settlement agent and title insurance carrier, those fees should be set. If the broker tells you that you can secure your own attorney who provides title insurance, then it's up to you determine the actual costs. Keep in mind, while a lender require a Lenders Title Insurance Policy, an Owners Title Insurance Policy is optional. Many lender only quote what is required. Some attorneys will not provide representation unless the borrower purchases an Owners Policy. An attorney can receive up to 60-70% of the policy premium. In many instances, the title examination fee rarely covers the actual cost of searching a title - the attorney depends on the premiums to cover their costs. (In my rural state, there are a few counties in which attorneys REFUSE to offer flat fee service, they insist on billing by the hour and every title search differs. A mortgage broker is simply throwing out a ballpark figure.)
You get what you pay for - you are not buying a product, you are buying a service. If you get a quote from a broker whose fees are slightly higher or who is an 1/8th of point off the rate, if he asks the right questions, if he takes the time to educate you on the process, if he gives you confidence he can secure financing and the pricing in the time frame required, then maybe he's providing you with a service that is worth the extra cost. (Would you work with the car mechanic who low-balled the estimate? Maybe you would and maybe you'd live to regret it.)
anon | September 6, 2006 02:31 PM