How Much Should I Pay for an Adjusted Origination Charge

I love reading how people found Mortgage Porter via search engines.  Apparently someone has been doing some research on how much their adjusted origination charge "should" be.  The new 2010 Good Faith Estimate was designed by HUD with the intent that consumers would be able to shop mortgages using a more meaningful document.  The 2010 GFE is suppose to be an easier tool for home buyers and those considering refinancing to make educated decisions about their mortgage. 

What HUD and mortgage rate shoppers alike cannot control is how often mortgage rates change…just as with the pre-2010 good faith estimate, if you are selecting your largest debt (your mortgage) on your largest asset (your home) by interest rate alone, you're doing so with a moving target.  The 2010 GFE does provide the consumer with some protection as to how much certain closing costs may change, it cannot and does not protect the consumer against unlocked rate changes depending on what the mortgage originator uses for an expiration period on the GFE in the "important dates" section.

What also has not changed is how mortgage rates are priced.  Home buyers and home owners interested in refinancing still have the option of having their mortgage priced with or without points or origination fees.  They simply need to communicate this to the mortgage originator.  Lower closing cost tends to equal a higher interest rate (typically, but not always, 1% of the loan amount tends to pencil out to 0.25% in interest rate).  Mortgage rate shoppers will still need to compare interest rate to closing costs keeping in mind that the rate shown on the GFE may no longer be available by the time they select a mortgage lender.

The 2010 Good Faith Estimate includes additional fees than just the origination on the "adjusted origination charges".  The fees reflected in this section may include:

  • loan origination fees
  • discount points
  • processing/admin fees
  • underwriting fees
  • funding fees
  • doc prep
  • wire fees
  • other misc. lender fees charged by the lender when originating a mortgage

For example, if a mortgage originator provides an estimate priced with zero origination or discount points, the adjusted origination charges may still show fees if they have an underwriting or funding fee (any fees listed above).  You can request the mortgage originator provide you with an itemized list of fees when reviewing an estimate. 

When reviewing the 2010 GFE make sure that you're also factoring in the lock period the mortgage originator is using (the shorter the lock period, the less expensive your rate will be).  Obtaining a rate quote based on a 15 day lock looks great and is useless if your transaction is closing in 30 days.  (Refer to the "important dates" section on page one of the GFE).

Don't forget, if your mortgage originator won't provide you with a good faith estimate on your home located in Washington State, I will.  Many LOs are reluctant to issue the 2010 GFE because of the liabilities associated with guaranteeing closing costs.

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