(310) 388-7332 jamesc2@gmail.com

Lenders Title Insurance

Security First National Bank

Sometimes buyers confuse Lenders Title Insurance with Title Insurance. They are different. Title insurance ensures that you as the buyer have free and clear title and is customarily paid by the seller. A Lender’s title insurance policy only protects the lender and is a buyer closing cost expense.

Lender’s require buyers to purchase a lenders title insurance policy prior  to funding a loan. Much like PMI, this insurance has no benefit to the buyer. The Lenders title insurance cost is based on the dollar amount of the loan- not the purchase price and can be calculated with a lenders title insurance rate sheet.  Typically Lenders Title Insurance costs between $500-$1,500 depending on the size of the loan.

GFE page 1
GFE page 2

 

The problem with the GFE in practice I find, is that the GFE isn’t very useful because it has exaggerated costs. Lenders inflate the costs a little bit because they can’t charge anything more than what is on the GFE which puts them in a bind because they don’t know all the transaction costs yet, so they give themselves a little padding. In addition to this, don’t ask me why this is a rule also, but a lot of seller side closing costs are put on the GFE that make it appear like the buyer will be paying those when they are not.

With the Good Faith Estimate above is from a transaction I recently did. Compare the GFE with the HUD1 in this transaction and you can see how dramatic the difference was:

ItemGFEHUD1
Origination Charge$1,575$1,575
Credit Report$75$60.59
Appraisal Fee$750$500
Flood Cert.$19.5$19.5
Tax Service$85$85
HOA Cert$450 (seller)$0
Lenders title insurance + escrow$4,300$790
ESCROW
Owners Title Insurance$2600 (seller)$0
Pest Inspection$150 (seller)$0
Government Recording Charges$150$100
Transfer Taxs$2912 (seller)$0
Daily Interest Charges$657 (16 days at $41 per day if closing date is X)$123 (3 days)
Homeowners Insurnace$639.96$639.96
TOTAL$14,364$5,748
The GFE in this transaction overstated buyer’s actual closing costs by $8,616!

The HUD1 Prepared by escrow has the accurate numbers for closing costs and should the document you reference to find your true cost. At the very least, when you get a GFE you can talk to your lender about it.

Are you in the closing process? Do you have more questions?

Please call me directly at (310) 388-7332 or click the button below and I will be in touch!

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