Throughout the closing process, you will have been given various documents, some being mandatory government disclosure documents. These disclosures are meant to keep you fully informed in regard to the costs you will or may incur in your closing. Among these documents may be a Good Faith Estimate of Closing Costs and a HUD-1 Statement. You could also receive an explanation of mortgage broker fees, if you engage a mortgage broker to help you find a loan. Many of the fees disclosed may overlap or be the same fees, such as an appraisal fee, origination fee, escrow fee or title insurance fees.

There are other fees, such as courier fees, notary fees, documentation fee, overnight delivery fee, points, processing fee, which may be duplicates of other fees, or which are fees which the originator has marked up to add to it’s profit margin. These are the fees, sometimes called hidden fees, which you may overlook or not feel you have the right to question. You do have that right.

Let’s look at the fees typically disclosed on the Good Faith Estimate form. This is the document which you will first receive if you are applying for a federally related mortgage loan. It’s purpose is to give you an estimate of the loan fees you might have to pay at closing. You will want to compare the fees found on the Good Faith Estimate form with those fees listed on the HUD-1 Closing statement, which is given to you at the time of closing. A few of these fees, such as the credit report fee or the appraisal fee may be required to be paid prior to the closing, but in general closing costs are paid at the time the sale is finalized. It is wise to question the fees listed on the Good Faith Estimate form, as once stated on the HUD-1 Closing statement, changes may delay the closing or you may feel it is too late. A delayed closing may require loan documents to be redrawn, the move-in date to be changed, or one of the parties in the transaction may not be available for signature.

The first category of charges listed on the Good Faith Estimate Form are those items payable in connection with your loan. These may include an origination fee, points, appraisal fee, credit report fee, mortgage broker fee, underwriting fee, processing fee, courier fee, and wire transfer fee. An origination fee and points are typically a set fee which you have agreed to pay in order to obtain your loan. It may be a percentage of the loan amount, say 1%, or it may be an agreed on amount. In some instances, the lender may not charge either of these fees. The origination fee and points are deductible as an expense item in some instances, but must be amortized over the life of the loan in others. You will want to weigh your options when agreeing to pay this fee. Oftentimes, you can “buy down” or reduce your over-all interest rate by agreeing to pay points. Take into consideration the length of time you will anticipate keeping the loan and weigh the benefits of paying these fees.

An appraisal fee and a credit report fee are typically not negotiable, as the lender or your mortgage broker will order these. Even though you may have an appraiser which you like and will offer you a reduced fee to perform the appraisal, the lender may require that the appraisal be performed by one of their “approved” appraisers. If you do, however, have an appraiser which is considerably less costly than the lender’s appraisal company, you appraiser can typically become certified by your lender by a simply providing the lender with certain licensing certifications. Using your own appraisal company may save you several hundred dollars in appraisal fees.

The mortgage broker fee listed on the Good Faith Estimate form is a negotiable item, a cost which you and your mortgage broker will agree upon when you apply for your loan. The lender’s inspection fee and underwriting fee and processing fee may be somewhat negotiable, but many lenders stay fairly firm on these fees. You can always ask and see if they will reduce them down or waive them altogether.

Courier and wire transfer fees are typically charged for transferring loan documents to the escrow closing company and wiring the loan proceeds to the closing officer. You may ask that these be reduced or waived. Ask if your lender has the ability to transfer the documents electronically. This may save you on these fees. Also be sure to verify that the closing agent has not marked up these fees at the time of closing.

The next group of fees listed on the Good Faith Estimate form are items required by the lender to be paid in advance and reserves required to be deposited with the lender. Look these other carefully, checking the calculations and comparing the figures with the amounts you were quoted for interest, mortgage and hazard insurance. Verify the property taxes.

Following the reserves required to be deposited into escrow, the government recording and transfer charges will be listed. These are fees which the government charges to transfer the property and record your loan and purchase and they are not negotiable.

The next list of charges may be survey fees, pest inspection or property inspection fees. Verify that these fees are exactly what you agreed to pay. Remember to look for any credits which the Seller agreed to give you on these costs. Many of these inspection fees are negotiable, and either Buyer or Seller may pay them.

The last category of closing fees are the title charges. These relate to the fees charged by the title or escrow company closing your purchase. There will be a settlement or closing fee, an abstract or title search fee and a title examination fee. Ask about these with your closing agent and ask if any of them can be reduced. The title insurance fees will then be listed. Be sure to check if you qualify for a “re issue rate” or a reduced fee. Oftentimes when title on a property has recently been searched, within the last two to five years, the title company will offer a reduced rate. If your transaction is a refinance, the lender may allow you up to a 60% discount off the standard published title insurance rate. Keep in mind that title insurance rates are state specific, and some states may impose a minimum title insurance fee, while others may not.

The next listing of fees will include a document preparation fee, notary fees, attorney fees, and other miscellaneous fees. Look these over carefully. Notary fees can be waived and attorney fees should be the same as you agreed upon initially. If these fees change, question the reason for the adjustment.

While questioning your closing costs takes some time and effort, you have the opportunity to save several hundred if not thousands of dollars at closing time. The small fees of $75 up to $300 may seem somewhat insignificant in relation to the total purchase of your new property, but when added together, they can make a difference. Every savings you make at the closing will be money well spent. This money can be used for repairs, remodeling, or furture expenses that come with owning a property.

It may happen that you or your spouse must be out of town at the time of your escrow closing. Perhaps you suddenly have to go out of the country and you may be worried how you are going to close your escrow on time when you can’t physically be present for the closing. There are several solutions to this problem.

The first solution and the one that has most often been used in the past and is most widely accepted is the Power of Attorney form. This form allows you to give the power of your signature to someone else who will sign on your behalf. You may sign a Limited Power of Attorney, which would pertain to a certain transaction, so you do not have to fear that someone could sign you life away. The Power of Attorney form may also be General, covering a broad range of topics. The Power of Attorney form should be recorded at the County Recorder’s office. When the person returns, he will record a cancellation of the power at the recorder’s office.

A second alternative to signing escrow instructions when you are out of town, is the use of a signature sent by way of Fax. Some escrow and title companies are allowing escrow instructions with fax copies of signatures, with the understanding that the original signed copies will be supplied a few days later.

The escrow holder allowing a faxed signature will include a statement which will state that “in the event the buyer, seller, agent and/or assigns utilize facsimile instructions, the escrow holder is instructed to rely and act upon such instructions, in the same manner as if the original signed instructions and/or amendments were in the possession of the escrow holder and the buyer and or seller agree to forward signed hard copies of instructions, and/or amendments within 48 hours ( or other specified time ) of transmission. The Escrow holder will take no responsibility or liability for any party who relies upon facsimile instructions which were erroneously transmitted to the escrow holder.”

Many escrow companies do not like to rely on a fax copy of signatures, as the opportunity to forge a signature is easily done. The escrow companies may use the fax system to gather required information, such as payoff and credit information, but they prefer to close escrow on live signatures, or with a Power of Attorney authorization.

A local friend of mine, a real estate attorney who has been a very successful full-time investor for 30+ years, shared this story with me one time. These are the actual letters; he kept copies for humor’s sake…

Hal
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Years ago, a New Orleans lawyer sought an FHA loan for a client. He was told the loan would be granted IF he could prove satisfactory title to a parcel of property being offered as collateral. No big deal; customary request.

The title of the property dated back to 1803. Instead of tracing title back 50 years, the customary amount, the lawyer traced it all the way back to 1803. This took him three months.

After sending the information to the FHA, he received the following reply (actual letter):

“Upon review of your letter adjoining your client’s loan application, we note that the request is supported by an Abstract of Title. While we compliment the able manner in which you have prepared and presented the application, we must point out that you have only cleared title to the proposed collateral property back to 1803. Before final approval can be accorded, it will be necessary to clear the title back to its origin.”

Peeved, the attorney sent back the following (actual letter):

“Your letter regarding title in Case No. 189156 has been received. I note that you wish to have title extended further than the 194 years covered by the present application.

I was unaware that any educated person in this country, particularly those working in the property area, would not know that Louisiana was purchased, by the U.S., from France in 1803, the year of origin identified in our application.

For the edification of uninformed FHA bureaucrats, the title to the land prior to U.S. ownership was obtained from France, which had acquired it by right of conquest from Spain. The land came into possession of Spain by right of conquest made in the year 1492 by a sea captain named Christopher Columbus, who had been granted the privilege of seeking a new route to India by the Spanish monarch, Isabella. The good queen Isabella, being a pious woman and almost as careful about titles as the FHA, took the precaution of securing the blessing of the Pope before she sold her jewels to finance Columbus’ expedition.

Now the Pope, as I’m sure you may know, is the emissary of Jesus Christ, the Son of God, and God, it is commonly accepted, created this world. Therefore, I believe it is safe to presume that God also made that part of the world called Louisiana. God, therefore, would be the owner of origin and His origins date back to before the beginning of time and of the world as we AND the FHA know it. I hope to hell you find God’s original claim to be satisfactory.

Now, may we have our damn loan?”

The loan was approved soon thereafter.