Maybe. Be careful about what you’re comparing.
While it’s easy to focus on the total cash needed to close, it’s not the most reliable way to shop around for lenders. Here’s why:
Most closing costs are third-party fees, like appraisals, title insurance, and taxes. These will be the same no matter which lender you choose. In fact, only a small portion of your closing costs are actually dictated by the mortgage company itself. That means the “cash to close” might not accurately reflect how competitive or transparent a lender really is.
| Cost | What is it? | How much is it? | Can I shop around for it? | How is it different between lenders? |
| Lender Fees | Fees charged by the lender for processing your loan. Includes application fees, loan origination fees, and underwriting fees. | $0 – $5,500+ total | Yes, compare lenders | Varies significantly. Some lenders (like us at Tomo Mortgage) don’t charge lender fees, while others may charge multiple fees. |
| Third-Party Fees | Fees paid to external services, including appraisal, home inspection, title search, title insurance, attorney fees, and transfer taxes. | Typically $2,000 – $4,000 total | No, usually set by third parties | Will be similar across all lenders. These fees are determined by third parties and local/state regulations. |
| Prepaid Costs | Upfront payments for homeowners insurance, property taxes, and mortgage interest before your first mortgage payment. | Varies: $2,000 – $5,000+ total | No | Same regardless of the lender you choose. These are standard costs based on your insurance provider, local tax rates, and interest rate. |
For instance, lender fees might be $1,000 for one lender and $4,500 for another. But third-party fees, like an appraisal, will generally cost similar regardless of which mortgage company you go with. Knowing which fees are negotiable will help you evaluate the best deal.
What closing costs should I pay attention to when trying to find a lender?
- Interest rates: “If lender A offers a 5.5% interest rate and lender B offers 5.7%, that small rate difference could cost you an additional $300–$500 per year in interest payments, depending on your loan amount. Over 5 years, that adds up to $1,500–$2,500, and over 10 years, you’re looking at $3,000–$5,000 in extra costs. While saving a few hundred on closing costs might seem helpful upfront, the long-term impact of a higher rate can really add up. That said, if you’re tight on cash for closing costs, reducing those fees may still be your main focus. We’re proud to offer some of the lowest interest rates in America, helping you save not just in the short term, but year after year, which far outweighs saving a several hundred on closing costs.
- Lender fees: Here at Tomo Mortgage we charge $0 in lender fees. This could save you several thousand dollars when comparing fees from other lenders such as Rocket Mortgage, Chase, Bank of America and Wells Fargo where fees range $2,000-$5,000*.
By focusing on the elements of the loan that vary between lenders, you’ll make a more informed decision without being distracted by costs that are out of the lender’s control.
*sources: Business Insider Mortgage Reviews: Bank of America, Wells Fargo, Chase,Rocket Mortgage, and HMDA data from 2023
If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.
