CFPB (Consumer Protection Financial Bureau) Closing Cost Guide
When purchasing a home with a mortgage loan, you should research the process and be an informed borrower. The CFPB (Consumer Protection Financial Bureau) was created to help protect you as the borrower/consumer. Below you will find suggestions they have for closing costs and the actual closing itself. The following information can also be found at https://www.consumerfinance.gov/owning-a-home/process/close/ Closing costs can add up to be thousands of dollars, and closing costs estimates can vary widely among lenders. Some of the closing costs are paid to third-party providers, which you can shop for separately. Lenders or real estate agents might recommend providers they have a relationship with, but those providers might not offer the best deal. You can often save money by shopping around for closing services.
WHAT TO DO NOW
Use your Loan Estimateto identify services you can shop for.You can shop for any of the services listed on section C of page 2 of your Loan Estimate (see a sample form). The specific services that you can shop for vary from lender to lender. Title services are the largest costs in this category, and in most cases you will be able to shop for them. Title services include title insurance, title search, and other costs and services associated with issuing title insurance. In most parts of the country, title services also include the fee for the closing agent who conducts your closing.
Identify potential closing service providers. Your lender is required to give you a list of companies in your area that provide the services you can shop for. You may want to use one of the companies on the list. Or, you may be able to choose companies that are not on the list if your lender agrees to work with your choice.
- Ask friends or family in your area which providers they used for various closing services. Some providers may offer more than one type of service.
- You can also look for providers online.
Contact closing service providers.
- Ask for a price quote and references from recent customers.
- Contact the references. Ask how responsive the company was to their questions and how the company handled problems.
Consider whether you want to purchase owner’s title insurance.
- Most lenders require you to buy a lender’s title insurance policy, which protects the amount they lend. You may want to buy an owner’s title insurance policy, which protects your financial investment in the home.
Choose your closing service providers and notify your lender.
- Choose providers that have competitive prices and also a good reputation.
Schedule your closing.
- When choosing a date, make sure to consider:
- Does your purchase contract specify a particular deadline for closing?
- Is there a specific date when you have to vacate your current housing?
- When does your rate-lock expire?
- Will your lender be able to complete their loan approval process in time for the closing?
- Is your closing agent busy with other closings at the same time? There may be more people trying to close near the end of the month. Consider scheduling your closing for the beginning or the middle of the month.
WHAT TO KNOW
The person handling your closing is often one of the service providers you can shop for.
- The person or company who conducts the closing may differ depending on the state in which the closing occurs.
- In most of the country, a settlement agent from a title insurance company conducts the closing.
- In other states, particularly in the West, the person is known as an escrow agent, and the parties usually sign the documents separately (rather than meeting in person).
- Some states, particularly in the Northeast and South, require a closing attorney from each side.
- Ask your lender or real estate agent what the situation is in your particular state.
Most lenders have service providers that they use if you don’t choose your own.
- Don’t assume that the providers your lender selects have been chosen for low rates or good service. In fact, the default or recommended providers often may be affiliates (related companies) of the lenders, so there may be a financial incentive for the lender to recommend them. Shopping around can save you money.
The costs for closing services may feel like a drop in the bucket compared to the cost of the home, but they can add up.
- Research suggests that borrowers who shop around for closing services could save as much as $500 on title services alone. That’s $500 that you can put toward new paint, furniture, and other improvements to make your new home feel more your own.
State laws may require different title insurance disclosures.
- Depending on the state where you are buying your home, your title insurance company may give you an itemized list of fees at closing.
- This itemized list may be required under state law and may be different from what you see on your Loan Estimate or on your Closing Disclosure. That does not mean you are being charged more.
- If you add up all the title-related costs your title insurance company gives you, it should match the total of all the title-related costs you see on your Loan Estimate or on your Closing Disclosure.
- When comparing costs for title insurance, make sure to compare the bottom line total.
Congratulations! You’re ready to sign the papers to your new home and the loan that you will use to pay for it.
WHAT TO DO NOW
If you haven’t already, get ourclosing checklist
- This step-by-step guide has tips for what to do and what to look out for before, at, and after closing.
Before you sign any papers, do a final walk-through of the home.
- Make sure everything that you and the seller agreed would be repaired has been repaired and anything the seller agreed to leave in the house is in place. If it isn’t, contact the seller immediately to discuss.
- If this is your first time buying a home, or you’re nervous about it for any reason, bring along a trusted advisor to the closing.
Take your time.
- There are many documents involved in a real estate closing. Many are required by the lender, and some are required by state and federal law. Regardless of who requires a document, you have the right to take your time and review them all. Make sure the information on the closing documents is exactly what you’re expecting.
- If things look different than what you were told or than what your earlier paperwork said, ask questions.
- Don’t sign anything until you’re fully satisfied that the paperwork matches your expectations.
WHAT TO KNOW
Sometimes things change a little bit in the last few days before closing.
- For example, if the seller hasn’t fixed something they agreed to fix, there may be a change.
- The seller may give you money to put towards your closing costs (known as seller credits) instead of trying to make the repair before closing.
If something important changes about your loan, you will receive a new Closing Disclosure.
- In limited circumstances, the law requires that you receive a full three business days to review the new Closing Disclosure before closing.
Don’t be afraid to ask lots of questions.
- A mortgage loan is a big financial commitment, and you have a right to understand what you’re signing up for. Don’t sign a document until you’re comfortable with what it says.
- If the problem or confusion is about the terms and conditions of the sale, ask your real estate agent or settlement agent (title company, escrow officer, or attorney).
- If the problem or confusion is about your loan, you’ll need to talk to your lender.
- If the answers you get don’t add up, don’t be afraid to stop the closing. This is the most important moment in the transaction.
You are not committed until you have signed the closing documents.
- You can always walk away at closing if you are not comfortable with the transaction. You may lose any deposit that you gave the seller, and there may be other consequences from breaking your purchase contract. You may also lose any application or appraisal fees you gave the lender. Know what your contract says and what your choices are before you walk into the closing.
HOW TO AVOID PITFALLSIf there are significant differences between the paperwork you reviewed in advance and the paperwork you see at the closing table, don’t sign anything until you are comfortable with the transaction.
- Don’t be afraid to slow things down if you need to. Ask questions. The best time to fix things is before all the documents are signed. Once everything is signed, if you discover anything that isn’t what you expected, you might have to hire an attorney to try to resolve the issue.
- Don’t ever sign blank documents or documents that say something different from the transaction you’ve agreed to. If the papers don’t reflect what you were told about the loan, that is a big danger sign.
- You can find the complete CFPB closing guide at: https://www.consumerfinance.gov/owning-a-home/process/close/