Is this typical or really shady?

We are in contract on a home with an on or around closing date of September 1st. When we originially spoke to the bank they laid out the potential closing costs and sent us a good faith estimate. Last week we received the commitment although there are a few things we still need to give them (home insurance, proof of transfer of funds to one place, etc.). On Friday, we received a new good faith estimate that "supercedes" all previous information and it's 20% higher than the original. I know that the prices can always change a bit - but this seems excessive. Also, are they allowed to change a good faith estimate this late in the game?

Re: Is this typical or really shady?

A good faith estimate is just an estimate, so it can definitely change, but it shouldn't change too drastically (assuming nothing major changed from when you applied for the loan to when you are closing).

Certain bank fees -- such as loan origination fees -- should be static and not change from the good faith estimate.

But other closing costs are attributed to prepayment of items like taxes, insurance, interest - these items can be lowered by closing later in the month.

The law that requires lenders to provide good faith estimates lays out what costs cannot change (a lot of the bank fees - loan origination, underwriting), what can change up to a certain percentage ceiling, and what can change with no ceiling (these are costs that the lender has no control over).

So whether what you are talking about is shady or typical depends on what caused the 20% increase... you need to look at the line items and/or ask your lender. Then, i would talk to your attorney about it to make sure the increase is allowable and justifiable.

Good luck!

Re: Is this typical or really shady?

Thank you for the information, it is much appreciated. We have definitely reached out to the bank, but I will speak to our lawyer as well.

We do not know the actual closing fees yet, this is just a second good faith estimate.

We actually spoke to more than one bank and went with this lender because the rates were the same but the estimated closing fees were less here. The other bank we spoke to had higher fees originally, but now with this increase - that bank would have been better. Still, it would take us a while to get a committment elsewhere and the contract date is coming up - I feel like they waited to give us a new good faith estimate at the end because our hands are tied.

One item for example was the appraisal - the original good faith estimate listed it as $370. The new good faith estimate listed it as $800.

Anthoner item that increased was the taxes - the original good faith estimate listed a cost of 6 months of taxes, the new estimate shows a 33% higher tax amount. Is it possible that our taxes jumped up by 33% because the appraisal was higher than the price the house was last sold for?

Re: Is this typical or really shady?

I would question the appraisal cost - appraisals are usually in the ballpark of $400. If the estimated cost more than doubled, that doesn't sound correct, esp since the lender is in control of which appraisal is used. Did you have only one appraisal?

But the lender has no control over the taxes - and that is a prepayment issue not a true "fee" for service - so that number would be the same regardless of which lender you chose to go with.

The taxes shouldn't be affected by the amount of the appraisal, and taxes are only changed once a year (so they wouldn't just go up at any time - in Nassau, school taxes come out in October and general taxes come out in January). But the appraisal is not disclosed to the government offices that handle assessment. When the sale closes and the purchase price becomes public, that may factor in, but it wouldn't now.

Is it possible that the lender had incorrect info at the time the first GFE was prepared? I mean, taxes are often incorrectly listed on the listing (because they are not verified, include exemptions/abatements, not updated).

Is this typical or really shady?

we had almost the same thing happen to us. I can't remember what items excatly went up but our "estimate" was way off what they told us like two days before closing. I flipped on my mortgage broker and he admitted it was their mistake (his or their underwriting team) so he had to "eat" the extra cost. A true good faith estimate should not be that much off.

Message edited 8/27/2012 2:52:27 PM.