financing secrets of a millionaire real estate investor.pdf

4/Working with Lenders 41
These charges are given fancy names but are really just ways for
the lender to make more profit. Lenders also pad their actual fees, such
as the cost of obtaining credit reports, courier charges, and other “miscellaneous
fees” (one lender admitted to me that he pays less than $15
for a credit report yet charges the borrower $85!). Understand that
lenders are in business to make money, so if a loan sounds too good to
be true, it probably is—look carefully at their fees and charges.
Good Faith Estimate
By law, a lender is required to give you a list of the
loan fees up front when you apply for the loan.
Unscrupulous lenders are notorious for adding in
last-minute charges and fees that you won’t discover
until closing. Of course, you are free to back
out at that point, but who wants to lose a good real
estate deal Lenders know this reality, so make
sure you get as much as you can in writing before
closing the loan.
“Standard” Loan Costs
While every lender has its own fees and points it charges, there
are certain costs you can expect to pay with every loan transaction.
These fees should be listed in the lender’s good faith estimate as well
as on the second page of the closing statement. The closing statement
is prepared at closing by the escrow agent on a form known as a HUD-
1, in compliance with the Real Estate Settlement Procedures Act
(RESPA), a federal law. A sample of this form can be found in Appendix
C. All of the following charges appear on page two of the form:
• Title insurance policy. While a lender secures its loan with a
security instrument recorded against the property, it wants a
guarantee that its lien is in first position (or, in the case of a