Q: Do you think that paying a lender 6 percent in closing costs on a $260,000 house is reasonable? What do you think?

A: I have a question for you: Why are you paying 6 percent to your lender in closing costs?

When it comes to buying a home, you may have quite a number of fees associated with your closing. You need to determine which fees are associated with your lender and which fees are associated with buying the home. Then you can review the fees to see if you are paying too much.

Generally you can plan to pay about 1 percent in fees and points to your mortgage lender (unless you’re buying down the interest rate on your mortgage). Other big fees will generally be the same from one lender to the other will be title charges and prepaid interest on the loan. At the most, these should not exceed 3 to 4 percent of the loan amount. (The later you close in the month, the less you’ll pay in prepaid interest on the mortgage.)

If you are in a state that has transfer taxes for the purchase of a home or a tax on recording a mortgage, those fees can add up.

In some cases, if the lender is going to hold back money in an escrow for your real estate taxes, that sum of money can be quite high.

If your lender is telling you that you have to pay 6 percent to get the loan, you may wish to go elsewhere for the loan. A straight 6 percent fee to get a loan is way above what most everybody pays when they buy a home.

You should talk to the lender about the closing costs and then visit several other types of lenders in the area to ask them what their closing costs would be on your loan. You’ll want to compare the cost of a national mortgage lender, local bank, local mortgage broker, credit union and perhaps a national bank.

Once you get their bids, you can compare the loan programs, costs and fees on an apples-to-apples basis. Hopefully, after you’ve gone through the process of shopping for a loan, you’ll wind up paying a lot less than 6 percent.

Published: Nov 8, 2007