Reverse Mortgage Lender Only Makes Up Portion of Costs
Closing a reverse mortgage loan will cost a good bit of money, and place of residence will not affect this fact. This is an essential truth that must be realized.
If you have a very low valued home it can be as much as ten percent of your value. Typically it runs about 5% of your total value as determined by a licensed FHA appraiser.
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.
It’s the bank’s fault that the costs are so high. Right? Well, I wouldn’t say the bank isn’t a part of the whole equation, but it’s not the whole equation.
The whole enchilada is comprised of as much as six or seven different companies. And I’m including the Federal government.
A closing document called the Good Faith Estimate of Costs separates and shows all of the closing costs, one of which is the origination fee. It is the sole fee from the bank.
It’s still a decent size fee, but it certainly doesn’t take up the lion’s share of costs.
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.
At the most FHA can charge $8340. The highest the origination fee can be is $6,000.
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.
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.
Anyway, another big bite out of the costs comes from the escrow company. They have several fees, including a transaction fee, insurance for the title, and others.
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.