How much is too much on a 234K loan?

Asked by Justin, Los Angeles, CA Sat Aug 28, 2010

I am applying for a 20%-down, fixed rate mortgage. The lender in his GoodFaithEstimate wants to charge me $4,230 for title services and lender's title insurance. Should I bargain with him on this? Is this reasonable for a 234K loan (asking price is 299,900; again, I put down 20%). Can I haggle in Southern California? What is the lowest amount he must charge me?

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Ray Fernandez-Silva’s answer
Ray Fernande…, Agent, Cerritos, CA
Sat Aug 28, 2010
Most important item for you is : Points:

Second: You need a breakout of all the fees....ask for a complete gfe and than we can a wise consumer and shop around with proof on your hands..the gfe is your proof!
0 votes
Felix Hung, Agent, Huntington Beach, CA
Mon Sep 27, 2010

Hard to answer without seeing your GFE. Mortgage professional estimate fees based on normal escrow charges. You wouldn't haggle the lender about fees that are not theirs (title and escrow fees). Total closing fees per HUD is normally between 3-4% of the loan amount (cost to obtain loan, closing costs, title fees, title insurance).

If you're looking to haggle. You should let your agent know that this is important to you and to try to negotiate where they send the file to for escrow. Customary for seller to control services with the guidance of the listing agent.

0 votes
Naia Waters, Agent, Santa Monica, CA
Sun Sep 26, 2010
You want your title person to be charging market rates and those sound too high. California insurance regulations affect the amount that title normally charges. However, I think you may have two things going on here: (1) Your title insurance is probably slightly high and this may be because the lender is "estimating" your charges and the new ethics rules are causing them to estimate a bit high, and (2) whoever wrote your purchase agreement (contract) or negotiated your contract -- did you have representation? -- may have allowed you to agree to pay for both sides of the title policy.

There are two parts to the title services in most contracts. (a) The title company does research to determine the title is clean and that nothing "clouds" that title, and all the debts against the property are known and are paid off. They create a policy to prove to the buyer that the title is clean. (b) Then, an add-on policy insures the buyer's lender of the same.

When the purchase contract is written, it generally states who will pay for the part which protects the buyer, and who will pay for the part which protects the lender. This is completely negotiable before the contract is written. Then, after you have signed the contract, it is an agreement --- which can be renegotiated if both parties agree. It is common practice (but not always the case) for the seller to buy the more expensive policy which protects the buyer. Then, commonly (but not always the case) the buyer purchases the add-on title insurance for their own lender. Like I said, that's the common way, but your own contract may have been written to some other specification.

I recommend that you look at your purchase agreement and see who was designated to pay for those two parts of the policy. You should also look at the contract to see which title company was named as the title company that would be used. Residential purchase agreements usually identify this. Sometimes it's a specific company and sometimes it's a more general agreement like "seller's choice" or "buyer's choice". If the title company is already agreed upon, then changing the title company requires a change in the agreement that both sides need to agree upon and then escrow can arrange for that new title company. (Be careful, though, because you may have already incurred title company charges if they have prepared much of the work already.)

Did you use a real estate agent? If so, check first with your real estate agent. If s/he cannot answer these questions, feel free to contact me directly and I'll put you in touch with my title guy who is extremely reputable and excellent at explaining these things.

Naia G. Waters
Realtor / Training Director
Prudential California Realty
3130 Wilshire Blvd., Suite 100
Santa Monica, CA 90403
310.754.0172 cell
Lic #01823116
0 votes
Cesar Badillo, Agent, Bellflower, CA
Sun Aug 29, 2010
Typically loan brokers charge 1% origination and title & escrow fees are 3rd party fees usually around $1600-$1800 in that price range.
0 votes
Deborah Brem…, Agent, Los Angeles, CA
Sun Aug 29, 2010
Title insurance shouldn't cost more than 1% of the purchase price in Southern California.

Title insurance costs are charged upfront: prior to or upon closing. The title insurance policy charge is negotiable between seller and buyer. Title insurance fees and charges for title services are inevitable - at least lenders title policy is required to purchase - no matter if the transaction is a refinance, or purchase, or you are buying a brand new construction home.

Also, lenders require title policies up to the loan amount, while an owner's title insurance coverage is recommended to cover full property value. You can assume that no matter the company, unless you get a short rate, all companies will be in the same range for coverage. There are more than 25 title insurers servicing Southern California. You could use your lender's advice as to which one to choose. Or, you could run your own title company search, or stick with some popular ones.

The BUYER can generally be expected to pay for:

* Lenders title insurance policy (for the amount of the loan only)
* 1/2 of the sub-escrow fee
* 1/2 of escrow fee
* Document preparation (if applicable)
* Notary fees
* Recording charges for all documents in buyer's name
* Tax proration (for any taxes unpaid at the closing)
* Homeowner's transfer fee (if applicable)
* All new loan charges/ points (except FHA/VA loans)
* Interest on new loan from date of funding to 30 days prior to first payment date Assumption or change of records fee on existing loan
* Assumption of existing loan
* Inspection fees (roofing, property, geological, etc.)
* Termite work (according to contract usually section 2 )
* Home warranty (unless paid by seller, according to contract)
* Fire insurance premium for first year

Immediately ask for a Buyers Estimated Closing Statement of Costs from your escrow company, and a HUD1 statement from your lender, and compare the two. Question discrepancies, and NEGOTIATE (or have your agent do it on your behalf). One lender I use is currently crediting for appraisals (a savings of about $500) and many lenders are offering 0 points loans. Do apply with more than one lender, and make sure at least one is a mortgage broker who can shop MULTIPLE lenders for you, looking for savings on interest rates and fees.

Deborah Bremner
REALTOR, 00588885
(O) 310-571-1364 DIRECT
(D) 818.564.6591
0 votes
C2 Financial…, Mortgage Broker Or Lender, San Diego, CA
Sat Aug 28, 2010

Since the purchase is taking place in Southern California Title & Escrow is handled by two separate companies. The escrow companies aren't regulated by the Dept. of Insurance and the fees are substantially higher.

is the home located in Los Angeles County? If so the escrow charge is split 50/50 between the buyer and seller. The title fees would be paid by the seller.

Also, its highly possible that your lender overstated the title fees on the Good Faith Estimate.

0 votes
Sat Aug 28, 2010
Is it 4230 just for the title insurance? That's definitely high. But it's not the lender who's charging that but the title company. There's usually a set amount the charge based on the loan amount, I doubt they artificially increased that price. Talk to you loan officer!

Elena Ollick
Amerivest Realty
Faith Home Loans
skype: napleshomes
0 votes
Shel-lee Dav…, Agent, Rolling Hills Estates, CA
Sat Aug 28, 2010

This seems high. I am not a lender, however, as a realtor who closes a lot of transactions in the $250,000 to $350,000 price range here is my experience. Please note, everything is negotiable to a certain extent. Both title companies and escrow companies must post their rates with the government bodies that regulate their industry. They have a range of fees, so you should be working to get your loan at the low end of the range. Your realtor should be helping you with this

Title insurance and all title company junk fees (sub escrow, document fees, etc) are around $1,000, give or take $200. Escrow fees, including all their junk fees are about the same. Other items that you will pay, which may be bringing your total so high are loan origination fees (often 1 - 2% of the loan amount, although many direct lenders are writing loans at par, which mean 0%), discount points (if you are buying down your rate), and other lender fees (some lenders will either waive these fees or charge a flat fee). Of course, if you are setting up impounds, this will also increase your needed cash at closing.

Go over your good faith estimate with your lender and question every line. Right now, lenders tend to overestimate charges as new lending laws do not allow them to charge significantly more than is disclosed on their good faith estimate, however, they are also not allowed to charge significantly less so you want to keep them honest. Make sure you are understanding each and every fee on the estimate. Then shop it around. Lenders are aggressively shopping for good buyers right now, with home sales at a 15 year low, putting you are in the driver's seat. Also, ask your Realtor for a recommendation for a lender or two they have successfully worked with in the past. They can often help you negotiate lower fees. Good luck in containing your costs and Dare to Dream.

Shel-lee Davis, QSC®
Certified Distressed Property Expert – CDPE®
Short Sale & Foreclosure Resource – SFR®
Certified HAFA Specialist – CHS®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
0 votes
Jacob Varghe…, , San Jose, CA
Sat Aug 28, 2010
"The Good Faith Estimate you received from the Originator identifies specific settlement services that are required in order for you to close your loan. Below is a list compiled by the Originator that identifies providers who offer those required settlement services. You do not need to pick any of the providers on this list and may shop for any of these required services."

These are wording taken from "Written List of Service Providers"

Any questions please free to contact me

0 votes
Paula Bean, , Orlando, FL
Sat Aug 28, 2010
Title insurace and other fees are negotiable. Get 3 quotes aqnd pay special attention to who your Realtor recommends because those who don't do a good job and don't close doesn't make anyone money. Listen to your Realtor
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