Here’s a comprehensive list of questions mortgage loan officers typically ask about closing costs, along with explanations for each. These questions are used during loan consultations to clarify cost expectations, identify potential issues, and ensure a smooth closing.
🧾 Questions Loan Officers Ask About Closing Costs (With Explanations)
- “Do you know what closing costs are and what they include?”
- Purpose: To assess the borrower’s understanding and set expectations early.
- Explanation: Closing costs typically range from 2% to 5% of the loan amount and include lender fees, third-party fees (title, appraisal), and prepaid expenses (taxes, insurance).
- “Do you want to pay your own closing costs, or are you hoping for seller or lender credits?”
- Purpose: To determine how the borrower plans to cover these expenses.
- Explanation: Some borrowers may request seller concessions or choose lender-paid options (slightly higher rate in exchange for credit toward costs).
- “Are you aware of the difference between lender fees and third-party fees?”
- Purpose: To explain the breakdown and avoid confusion.
- Explanation:
- Lender fees: Origination, underwriting, processing.
- Third-party fees: Appraisal, escrow, title insurance, notary, recording.
- “Do you want to include your property taxes and homeowners insurance in your monthly payment (impounds/escrow)?”
- Purpose: To determine if the borrower wants an escrow account.
- Explanation: Including impounds increases the amount due at closing (for prepayment), but simplifies budgeting.
- “Do you understand how discount points or lender credits work?”
- Purpose: To educate the borrower on rate vs. cost trade-offs.
- Explanation: Paying points lowers the rate, while opting for a slightly higher rate can yield lender credits to reduce upfront costs.
- “Would you like a no-closing-cost option, or do you prefer a lower rate with upfront fees?”
- Purpose: To tailor the loan structure based on borrower goals.
- Explanation: “No-cost” loans roll costs into rate — best for short-term ownership. Lower rate with fees is better for long-term.
- “Are you purchasing a home, or refinancing?”
- Purpose: Closing costs differ by transaction type.
- Explanation: Refinances often have fewer fees (no agent commissions), while purchases may include escrow split, transfer taxes, etc.
- “Is this property located in an area with transfer taxes or special assessments?”
- Purpose: To factor in location-specific costs.
- Explanation: Cities like San Francisco have high transfer taxes, and some properties may have Mello-Roos or HOA fees.
- “Have you received a Loan Estimate (LE) from another lender to compare fees?”
- Purpose: Allows for fee comparison and transparency.
- Explanation: Loan Estimates help borrowers evaluate differences in origination fees, title charges, and escrows across lenders.
- “Will you be using a specific title/escrow company, or should we use our preferred provider?”
- Purpose: To estimate fees accurately.
- Explanation: Title and escrow fees vary by company and state. Preferred providers may offer discounted packages.
- “Do you want a breakdown of prepaid items vs. true closing costs?”
- Purpose: Helps borrower understand what’s a cost vs. a deposit.
- Explanation: Prepaids include taxes, insurance, and interest — not fees, but still part of closing cost total.
- “Would you like to see a side-by-side breakdown comparing all-in cost options?”
- Purpose: To present multiple rate/cost structures clearly.
- Explanation: Helps borrower make informed decisions (e.g., pay points vs. take credits).
- “Are you concerned about having enough cash to close?”
- Purpose: Identifies if borrower needs help structuring a low-cost or high-credit loan.
- Explanation: If cash to close is an issue, options include DPA (down payment assistance), seller credits, or lender credits.
✅ Summary
These questions help loan officers:
- Clarify borrower goals and budget
- Educate about cost breakdowns and financing strategies
- Avoid surprises at closing
- Offer customized solutions (e.g., credits, no-cost loans, rate buydowns)
Disclaimer:
The questions and answers provided are for general guidance only and may not cover all details or apply to every situation. If anything is unclear or you need further clarification, please visit car.org for official resources and the most up-to-date information from the California Association of REALTORS®.
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