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How to compare closing cost when getting a mortgage (USA)
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Question:
I will do a 15 yr refinance tomorrow on a 4.375% 15 yr fixed loan, with a 180k balance. Closing costs are $3,000. Is this rate somewhat fair?Answer:
What is included in the 3000 ? Prepaid interest / prepaid property tax, and if so, how much?The proper way to compare 'closing cost' is to look at all the lender's fees only. They are on the good-faith-estimate in the 800 section. (Line numbers 800 - 899).
Items in 8xx are 'origination fee', 'underwriting fee', 'processing fee', 'credit report'.
The rest is standard, not lender dependent.
If you pay $3000 to the lender, then it is a bad one, in my opinion. The rate is good though, so if they call it $1800 'underwriting fee' or '1 point', it may be a wash. Well, except that points are tax deductible. Other fees are not.
(Note that in a refi, points are deducted over the life of the loan. Not in full deducted in the 1st year.)
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