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"Guaranteed" Closing Costs Don't Mean That the Whole Estimate Is Guaranteed.

With the dawn of disclosure in the form of the GFE comes the expected, "Okay, we know we should have been giving you accurate closing cost quotes all along, but this time we guarantee that we'll get it right!"

What a concept, right? Can you imagine this type of cost chicanery in another industry? I can't think of one.

"Hi, can you tell me the cost of that bicycle?"

"Sure; it's between $500 and $800."

"Well, which is it, $500 or $800?"

"We can't tell you exactly until you get to the cash register to pay."

Can you believe it? You want to know the price of something, but you don't get it until it's time to open your checkbook?

"Pardon me, I'd like to know what you would charge to represent me in my legal case."

"Sure; I charge anywhere from $100 an hour to $700 per hour." "But I want to know how much you're going to charge before I decide to use you."

"Sorry, but I can only give you an estimate."

That's the problem with the Good Faith Estimate: It's only an estimate. If it's mildly off, you grin and bear it, and if it's wildly off, you don't grin and possibly lose the deal entirely.

But along come closing cost "guarantees." A lender will guarantee its closing costs. Only in lending, right?

But there are two types of such guarantees floating around in the marketplace:

Lender guarantees One-fee guarantees

Lender guarantees are the more common variety of lender closing cost guarantees. They essentially mean that the lender will quote you some closing costs and guarantee that they'll be accurate.

But what is this lender guaranteeing, and, more important, what is the guarantee? Do you get a free loan or something?

There are lenders who have gotten themselves in trouble by advertising "guaranteed closing costs" but pointing out in the fine print that they don't guarantee anything but their own closing costs and that the guarantee applies to no one else's charges. That means that the lender can mostly do whatever it wants with regard to quoting nonlender charges as long as it gets its own fees right.

Big deal. Lenders certainly should know their own closing costs. It's like asking their name. What's your name? "Big Lender." What are your closing costs? "$799."

There should be no fudge factor when lenders quote their own fees. Heck, the fees are all over their rate sheets for their loan officers to quote their customers. But okay, what if the lender's fees are quoted incorrectly? What exactly happens? Does the lender give you a million dollars?

Of course not. The lender simply makes the adjustment at closing, and you're on your way to closing. A lender guarantee on closing costs is nothing more than a marketing gimmick. It's like the lender guaranteeing its mailing address. It's not a bad idea by any stretch; it's the notion of guaranteeing something that should be taken as a given that's ridiculous.

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