Reverse Mortgage Costs High - It's Not Just the Lender!
Something to remember: the costs of concluding a reverse mortgage will be lofty. It doesn't make a difference where you reside.
The cost of closing is determined using the value of the home, which is figured by an appraiser. It is generally five percent but can go up to ten if the home value is very low.
In my line of work, I talk to borrowers all the time that are not aware of this fact. Sometimes my company even gets the rap for how rough the costs can be.
You might be thinking that the lender is the reason closing is so expensive. Actually, that is just one factor in the big scheme of things to make this happen.
About 7 separate entities make up the entire closing process, the Federal government being one of these.
When you pull out the Good Faith Estimate of Costs, among the list of fees is one called the origination fee. This is the only thing that the bank itself bills the borrower.
Don't get me wrong, the origination fee is still substantial. But it is not the majority of the cost.
The culprit behind the bulk of the cost is the mortgage insurance. Two percent of the homes worth (for homes worth $417K and below) is billed to the borrower.
At the most FHA can charge $8340. The highest the origination fee can be is $6,000.
This new law makes me laugh. The lender is told to what extent he can profit, while the government has no restriction on what they make.
This is a side-note.. Did you notice all the phone calls wanting campaign donations? Yes, they are excluded from the National Do-Not-Call rules.
Where were we? Closing costs. The company issuing the title on the house is responsible for a good portion of the cost, with a number of fees such as a transaction, title insurance, and binder fees.
Then don't forget the appraisal fee for a formal valuation. In some states you have to get the land surveyed as well. That aint cheap.
I can't speak from states outside of Texas. I wouldn't be surprised if borrowers are on the hook for other expensive little goodies there not mentioned here. Just remember the bank is not always the culprit.
The cost of closing is determined using the value of the home, which is figured by an appraiser. It is generally five percent but can go up to ten if the home value is very low.
In my line of work, I talk to borrowers all the time that are not aware of this fact. Sometimes my company even gets the rap for how rough the costs can be.
You might be thinking that the lender is the reason closing is so expensive. Actually, that is just one factor in the big scheme of things to make this happen.
About 7 separate entities make up the entire closing process, the Federal government being one of these.
When you pull out the Good Faith Estimate of Costs, among the list of fees is one called the origination fee. This is the only thing that the bank itself bills the borrower.
Don't get me wrong, the origination fee is still substantial. But it is not the majority of the cost.
The culprit behind the bulk of the cost is the mortgage insurance. Two percent of the homes worth (for homes worth $417K and below) is billed to the borrower.
At the most FHA can charge $8340. The highest the origination fee can be is $6,000.
This new law makes me laugh. The lender is told to what extent he can profit, while the government has no restriction on what they make.
This is a side-note.. Did you notice all the phone calls wanting campaign donations? Yes, they are excluded from the National Do-Not-Call rules.
Where were we? Closing costs. The company issuing the title on the house is responsible for a good portion of the cost, with a number of fees such as a transaction, title insurance, and binder fees.
Then don't forget the appraisal fee for a formal valuation. In some states you have to get the land surveyed as well. That aint cheap.
I can't speak from states outside of Texas. I wouldn't be surprised if borrowers are on the hook for other expensive little goodies there not mentioned here. Just remember the bank is not always the culprit.
About the Author:
In Texas do not get a reverse mortgage before acquiring this guide. And by the way.. Definitely acquire a fact sheet at this reverse mortgage in Texas educational hub.
posted by Credit Counseling at
10:36 PM
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