It’s important to know the numbers and understand how you
can negotiate with your lender and in some cases the seller to help you get
these numbers down.
When you fill out a loan application the bank, loan officer
or broker has 3 days to provide you with a good faith estimate. This
good faith estimate
(GFE) will show fees and credits. Because we now have a new (GFE) that is not
easy for some to read I provide a fee sheet that breaks down all the fees line
by line. If you don’t get this from your lender ask for it. HUD has also
provided a book with a step by step of how to read it. Funny it was suppose to
be less confusing for the consumer but yet they feel the need to explain how to
read it.
HUD
Booklet
I’d like to go over a list of
closing fees that cannot be
negotiated because they are third party fees charged for services.
1.
Credit
Report fee; This is paid by you upfront or by the lender and is needed to
get your credit history so your loan can be priced out and have your credit analyzed
for loan approval.
2.
Appraisal
fee; This is also paid by you upfront in most cases and the price varies
greatly depending on what part of the country your home is located. We are seeing
many of the new refinancing programs where value can be determined using automated
systems some lenders are waiving the need for physical inspections.
3.
Title and
Escrow fees; Title insurance, escrow fee, notary, recording, courier, doc
prep, and other misc fees are determined by your Title and Escrow company. You
can shop for best pricing and if you are the buyer, you are allowed to pick the
title company of your choosing. I’ve seen these vary so do call around and get
a fee quote. Ask for it in writing so
they will know about you and honor the quote once you choose them.
4.
Flood
Certificate; Lender will require this document to determine if your home is
in a flood zone.
This cost is minimal but I’ve never closed
a loan without it.
5.
If you
are applying for VA, FHA, USDA or any other government type of loan; any fee
associated with that loan program cannot be negotiated. They can however in
most cases, be paid for by the seller and you or your Realtor can negotiate
those terms.
Now for those fees that are negotiable.
1.
Origination
Fee or Broker Fee; This fee is charge to a borrower for the simple reason
that it cost to process and complete your loan, i.e. “The Cost to do business”
2.
Lender
Fees; underwriting, processing, administration and application are the most
common.
3.
Discount
Points; These are based on a percentage of your loan amount, i.e. 1 Point
is 1% of your loan amount. Each point you pay reduces the interest rate you
will pay on your loan.
Now for your reoccurring or prepaid closing costs; These
costs will be associated with your loan no matter where you go for your loan. They
will vary only depending on the day of the month your loan closes.
1.
Interest
per day on your new loan; Just that it’s the interest calculated on your
new loan until your first payment of interest and principal start calculating.
Remember your mortgage payment is always paid 30 in arrears. For example if you
close your new loan on the 15th of June, your closing HUD statement
would reflect 15 days of interest paid to your new loan, and your first payment
would be due on August 1, July’s interest and principal is due August 1…
another cool stat is in most cases when you refinance you get to skip a month
of making a house payment.
2.
Insurance;
Your homeowners insurance, I encourage everyone to shop their current company
and get the best pricing on the market. If you haven’t you are probably paying
too much.
If you are buying get several quotes for
your new home early on and choose one. Getting this information to your loan
officer early can save time at closing.
3.
Taxes;
Property taxes vary from county to county in the US, it’s important to
understand when they are due and how to pay them. Ask your escrow officer at
your signing to explain due dates to you.
4.
Impounding
both Insurance and taxes and paying them in your mortgage with each monthly
payment;
This is a very important part of buying and
refinancing a home. The lenders have taken it upon themselves to help you make
this decision with a huge incentive. Let me explain,
If you have an 80% or above
Loan-to-value (LTV)
the lender requires an impound or escrow account be created at the onset of
your loan, because your loan is considered at higher risk.
If you are at or below 80% LTV and you choose
to NOT have an impound account. Because it is up to you, they charge you .250%
hit to your pricing. This encourages borrowers to create an impound account
with their lenders. The lenders do this so they know the taxes and insurance
are getting paid on the property that secures their loan.
·
Buyers and
Realtors when possible can negotiate
with seller to help with the cost of closing. Most loan programs will allow
for seller assistance of 3% to 6% of the purchase price and in most cases this is enough to cover
all of the buyers closing costs leaving just the down payment to be covered by
the buyer. This alone would help move more houses in this market. We are seeing
more banks with foreclosures, REO’s doing this, don’t be afraid to ask!
Thank you for stopping by, I encourage you to leave your
comments and questions. Follow my blog by clicking on one of the follow buttons
on the right side of my blog or follow by email.
Roxy Redenbaugh
ACMC, Loan Consultant
Branch Manager
NMLS #269926
808-637-0011
