Which Closing Costs Can Rise Before You Sign

Not every line on a Loan Estimate is pinned down the same way. CFPB says it is illegal for lenders to deliberately underestimate the costs on your Loan Estimate, and it sets out three categories of closing costs with three different limits on how much each can move.

The group that can’t increase at all

Absent a change in circumstances, these cannot change: fees paid to the lender, the mortgage broker, or an affiliate of either for a required service; fees for a required service the lender did not allow you to shop separately for, where the provider is not affiliated with the lender or broker; and transfer taxes.

The group capped at 10 percent

Absent a change in circumstances, the total of these costs cannot increase by more than 10 percent. That covers recording fees, and fees for required services where you chose a third-party provider on the lender’s written list. There’s one exception: if the provider you chose is an affiliate of the lender, the cost can’t change at all. Note that the 10 percent applies to the total of the group, not to each line.

The group with no ceiling

These are not controlled by the lender and can increase by any amount at any time: prepaid interest, property insurance premiums and initial escrow account deposits; fees for lender-required services you shopped separately for where you chose a provider not on the lender’s written list; and fees for third-party services the lender does not require.

What you can shop for

CFPB says you can shop for all of the services listed in section C of page 2 of your Loan Estimate, and that the lender must provide a written list of closing service providers when it gives you the Loan Estimate. You may be able to use a provider who is not on the list, as long as the lender agrees to work with them.

What a change in circumstances means

CFPB’s examples: you decided to get a different kind of loan or change the amount of your down payment; the appraisal came in higher or lower than expected; you took out a new loan or missed a payment and that changed your credit; or the lender could not document your overtime, bonus or other income. In those situations the lender may change closing costs without restriction, and you will likely receive a revised Loan Estimate.

The rate is separate

If your rate isn’t locked, it can change at any time. Even a locked rate can change if your application information changes, or if you do not close within the rate-lock timeframe. Check the top of page 1 of the Loan Estimate to see whether the rate is locked and until when.

If the limits are broken

CFPB says that if the costs have increased more than the allowed limits and your application has not had a change in circumstances, you are entitled to a refund of the amount above the allowable limits. That is a reason to keep the Loan Estimate and compare it to the Closing Disclosure before signing.

Reading them side by side

Line the estimates up, then note which lines sit in which group before you judge the total. Want a second pair of eyes on yours? Ask me. Diana Kim, REALTOR®, eXp Realty.