A lender estimates the closing costs on a home loan of $50,000 as listed below.
Closing Cost

Charge
Loan origination

$200
Title insurance

$530
Attorney’s fees

$600
Appraisal

$265
Inspection

$575
Recording fees

$130
Escrow

$800

If the lender's good faith estimates are accurate, are they a reasonable amount for closing costs? Why or why not?
a.

Yes, because the lender esitmated 3.08% of the home loan in closing costs which falls between 3 - 5%.
b.

Yes, because the lender estimated 4.6% of the home loan in closing costs which does not fall between 3 - 5%.
c.

No, because the lender estimated 6.2% of the home loan in closing costs which does not fall between 3 - 5%.
d.

No, because the lender estimated 17.7% of the home loan in closing costs which does fall between

C- The lender should not consider them as reasonable amount of closing costs because the lender estimated 6.2% of the home loan in closing costs which does not fall between 3-5%.

The lender cannot be accepting these costs as this will lead to the lender incurring losses over a longer period after doing all the necessary calculations.

The lender has disbursed a home loan of $50000 on which he has estimated certain closing costs and are considered to be true and accurate. The costs are loan origination, title insurance, attorney's fees, appraisal, inspection, recording fees, escrow, etc.

The amounts will add up as a summation of all the fees and charges as titles above are mentioned which will end up totaling to $3100

[tex]200+530+600+265+575+130+800=3100[/tex]

The calculation of of costs in to the percentage of total home loan is calculated as dividing the cost with total loan amount which will be totaled as 6.2%.

[tex]\frac{3100}{50000} *100= 6.2[/tex]

The costing of this home loan is way above the ideal range of 3-5% and is not worth disbursing and may be called back.

Hence, the correct option is C that the amounts of $3100 are not a reasonable amount of closing costs because the lender estimated 6.2% of the home loan in closing costs which does not fall between the range of 3-5%.

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