I'm a first time home buyer and looking around for a mortgage. The GFEs I've recceived are a bit confusing.
I have several GFEs and they're all different. My lenders are aware that I'm looking for a loan that doesn't require to pay points so these are not included. But I'm confused as to why some lenders included origination fee and some did not. Is this fee negotiable? and also could someone please explain the whole escrow business? how does it work? how much is initially put down for the escrow? (12 months worth or just a few?) Thanks in advance for your input
- 1 decade agoFavorite Answer
To begin with, origination or discount points are pretty much the same thing. 1 point is equal to 1% of the loan amount. Usually what is covered in a point/discount is the ability to buy down your interest rate to a lower rate. When you do not pay any points/origination fees, then your interest rate will be typically a little higher. In some cases it is worth paying the point if you plan on living in the place for a while.
Now as far as escrow. Are you talking about the escrow company that will be handling the paperwork or an escrow account/impound account on your loan.
An impound account will hold a certain amount of months for taxes and insurance. Typically 14 months for insurance. Taxes can range anywhere from 1-8 months depending when your tax cycle hits.
Escrow companies, they are the third party looking out for you. They make sure that everything in the contract has been met and they handle the exchange of the monies.
As a first time homebuyer, you should also check with your state to see if they have something. I am an authorized lender for the State of California for their first time homebuyer program. If you live in this state or have any other questions, please email me at firstname.lastname@example.org
Jayne @ Guild Mortgage Company
- glennLv 71 decade ago
The origination fee is traditionally 1%. I have a quote sheet from a local company right here that is a few days old. It says a 15 year fixed rate FHA is 6.375 with no points and no origination. The same loan at 6.25 has an origination fee of a quarter of a point. So they get their money thru the intrest rate or up front-whichever you want.
If you have an escrow account, they tend to want enough in there so they can pay the bills a month before they come due. that means that if you close in late June they will want Seven months of taxes in there if the taxes have to be paid by the end of the year. They also want some money in there to pay for next years homeowners policy-since that is a year away they may just want a month or two in there.
I would really pay attention to referals. If no one I know has ever used this loan officer I would never use them. A bad or dishonest loan officer can ruin your home purchase. Don't pick someone just because they claim to be the cheapest-sometimes they "bait&switch".
- Anonymous1 decade ago
Yes its always negotiable. Its simply an extra commission for them. They will still make money even if they dont charge you anything. Every bank, mortgage broker, ect ect is slightly different in what they will or will not charge. I was lucky enough to have a family friend who was our mortgage broker and he didnt charge us any pts. or origination fees. Are closing costs are almost nothing because of it.
Escrow is also a case by case process. Some lenders want taxes and home insurance ecrowed into payments and closing costs. And some just have you pay them on your own.