First time buying, and the estimate has an origination charge, prepaid interest, and something called an escrow or impound reserve. When I ask, I get told they are standard. I understand they are standard, I want to know what I am paying for and whether any of them move. The three together are more than 1800 and it is the largest single number on the page after the deposit itself.
The prepaid interest number swings on your completion date and nothing else. Complete near the end of the month and you owe a handful of days. Complete near the start and you can be paying for nearly a full month up front. It is not a saving as such, since you pay for the days you own the place either way, but if cash on the day is tight it is a lever you actually control.
Worth checking against your rent end date though. Saving three days of interest and paying an extra half month of rent is not a win.
One caution on the escrow cushion: it is your money, but it is your money that is now unavailable to you on moving day, when you are also buying a fridge and paying someone to shift boxes. Count it as cash out even though it is not a cost.
Ask for the number the day before completion as well as at estimate stage. Mine moved by about 300 between the two and nobody would have told me if I had not asked.
@pandl_paula · 9mo ago · 3 replies
All three are ordinary, and only one of them is really a fee. Worth saying that the exact names and rules vary a lot by country and even by region, so treat this as the shape of it rather than the letter of it.
Origination charge is the lender being paid to make the loan. It is a fee, it is theirs, and it is the one that is genuinely negotiable or at least comparable between lenders. Some lenders bury the same money in a slightly higher rate instead, which is why comparing this number alone will mislead you.
Prepaid interest is not a fee at all. Interest is usually collected in arrears, so on completion day they collect the interest for the days between closing and the start of the first full period. You are paying for days you actually have the money.
The escrow or impound reserve is also not a fee. It is your own money, parked with the servicer so they can pay your property tax and insurance when those fall due, plus a cushion of a couple of months. You get it back or it gets used on your behalf.
Ask for the itemised sheet and sort the lines into lender fees, third party services, and prepaid or escrowed money. Then push only on the first group. Arguing about the third group just makes you look like you have not read it.
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@query_quinn · 9mo ago
Sorting into three groups made the whole page readable. Two thirds of what I was panicking about turns out to be my own money moving accounts.
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@threefund_dana · 9mo ago
Also ask specifically which third party services you are allowed to shop for. On some of them you can bring your own provider and save real money, and lenders rarely volunteer that.
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