Flat fee mortgages typically only cover the lenders costs such as processing fees, underwriting fees, tax service fees (used to set up an escrow account) and credit report costs.
You will still incur normal title charges, reserves, pre-paids and possibly other charges on these types of loans.
Not all people offering flat fees are telling you the whole story. Flat fee mortgages are almost as expensive in general as no closing cost mortgages in terms of higher interest rates, more debt, and unfavorable terms.
Of course if you choose to go the flat fee mortgage route, the interest rate is likely to be a bit higher than a normal mortgage where you pay these fees upfront. The higher interest rate will help offset these fees.
Always have your broker compare a "FLAT FEE" mortgage, and a mortgage with a lower interest rate and higher fees. Most times you will find that your up front costs will save you money in the long run with a lower interest rate. You want to look at the long term and find out which loan makes the most financial sense.
Knowing how long you want to keep a mortgage is key in making a decision on how you want to pay your fees. The longer that you expect to keep a mortgage, the lower you will want your interest rate to be. Your savings will be increased for every month that you keep a mortgage with a lower interest rate than a different one.
As with every mortgage home loan transaction is important to request a Good Faith Estimate so that you can see exactly what is being charged.
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