Reverse Mort Company Not Cause of High Closing Costs

By Borkow Vanrock

Something to remember: the costs of concluding a reverse mortgage will be lofty. It doesn't make a difference where you reside.

Usually, closing costs are around five percent of the home value, however if the house is considered on the low end in terms of worth, it could be up to 10%.

This can hit some borrowers hard when it takes them by surprise. Many times they consider the harshness of the transaction the loan company's fault.

So, who do we blame when there is no one else to blame? Mostly people like to point their fingers at the mortgage company. Those greedy pigs.

The whole enchilada is comprised of as much as six or seven different companies. And I'm including the Federal government.

If you look at what is known as a Good Faith Estimate of Costs, you will notice a litany of fees. Only one of these fees is charged by the actual lender. It is known as an origination fee.

Is it sizable? Yes. Does it take up the lions share of cost. No.

Of all closing costs HUD charges the most of any company for homes valued between $100,000 and $417,000. They charge an insurance fee of two percent of value.

FHA can charge up to eight thousand, three hundred and forty bucks, while the bank charges as much as six thousand for origination.

Did I mention this is new law? For some reason the Feds don't mind telling the lender the highest amount they can bill, all the while leaving themselves without a cap.

By the way, were you solicited for political donations recently? Perhaps you thought you were on the big Do Not Call list, and you may be, but these guys conveniently left themselves out of that law.

Back to costs. The title or escrow company takes a big chunk of the costs as well, between title insurance, additional binders, and their fee for conducting the transaction.

The appraisal will be listed here as well, along with the costs of a land survey, which is required depending on where you live. The latter can run for quite a bit.

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.

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