Closing Costs

Closing costs are fees charged by different parties to complete your real estate transaction.  It is extremely important to know the difference between non-recurring closing costs and recurring closing costs.  Non-recurring closing costs are one time fees that are charged only for that loan or real estate transaction.  These fees typically include appraisal, credit report, underwriting, loan processing, (we don't charge this fee at Mathews Mortgage), points, origination, escrow, title, notary, doc prep and recording fees.  Recurring closing costs are fees that will continue to occur such as prorated interest on your loan, property taxes and homeowners/flood insurance.  Impound accounts for property taxes and insurance would also be considered recurring closing costs.  Since recurring closing costs will not change no matter which lender you choose, you should only compare non-recurring closing costs when you are shopping for a loan. 

The APR, (annual percentage rate) is an estimate based on certain closing costs of how much the effective interest rate on the loan would be if you considered the closing costs.  The problem with comparing APR is that not every bank or mortgage broker computes this rate the same way.  So you could end up with several different APR's even if they use the exact same closing costs on the good faith estimate.

When shopping for a home loan, the best way to compare closing costs is to ask for a good faith estimate from several different lending sources. Heres what to look for:

•   Make sure that the good faith estimate separates non-recurring from the recurring closing costs
•   Make sure the loan program matches
•   What is the rate lock period offered?
•   Is there a prepayment penalty?

After you have confirm this information, compare the total non-recurring costs and interest rates on each form.  Determine which lender has the lowest fees and interest rate.  If you find 2 or 3 lenders that have similar rates and fees, decide which lender has the best reputation and experience.  Go with the one that you feel most comfortable with.  Remember, you get what you pay for and sometimes a lender that advertises extremely low rates and fees cannot always deliver on their promises. 

 revised 8/20/07 by Kevin Mathews