Question

lender estimates the closing costs on a home loan of $50,000 as listed below.
Closing Cost
Charge
Loan origination
$200
Title insurance
$530
Attorney’s fees
$600
Appraisal
$265
Inspection
$575
Recording fees
$130
Escrow
$800

If the lender's good faith estimates are accurate, are they a reasonable amount for closing costs? Why or why not?
a.
Yes, because the lender estimated 3.08% of the home loan in closing costs which falls between 3 - 5%.
b.
Yes, because the lender estimated 4.6% of the home loan in closing costs which does not fall between 3 - 5%.
c.
No, because the lender estimated 6.2% of the home loan in closing costs which does not fall between 3 - 5%.
d.
No, because the lender estimated 17.7% of the home loan in closing costs which does fall between 3 - 5%.

Answer 1

Total closing costs = 200 + 530 + 600 + 265 + 575 + 130 + 800 = $3,100.
Percent of $50,000 = 3,100 / 50,000 = 0.062 = 6.2%.

Typical closing costs are about 3–5% of the loan, so 6.2% is above that range. Answer: c.