a complete guide to closing costs and the the good faith estimate - presented 1-22-09

A Complete Guide to Closing Costs and the Good Faith Estimate

Thank You for Attending

We Will Begin in a MomentClass will begin at 6:30pm

Presented By:Broadview Mortgage Corporation

Presenter:Scott Schang

Contact Information:

Phone: [email protected]


The Purpose and Goals of this Class

• To Create and Empower Home Owners

• Educate you about the costs involved in Purchasing or Refinancing a home

• Empower you with the ability to identify inaccurate or incomplete GFEs designed to lure you into uneducated decisions

• Enable you to make sound financial decisions based on information, education and experience


Topics We Will Cover In This Class

• The original intention behind providing you with a Good Faith Estimate - GFE

• A Complete Breakdown of typical costs involved in Purchase and Refinance transactions

• Common signs of inaccurate or incomplete Good Faith Estimates

• The Dangers of Shopping for Interest Rate


Ask Questions throughout presentation

– You may type questions in at any time during the presentation – Question and Answer box on your screen / Control panel

– Specialists are standing by to answer your questions during the presentation

– This is an interactive learning environment. You will get the most value by having your specific questions answered

– The only dumb question is the one you don’t ask

Write number down now in case you get disconnected

1-866-667-6724



• Disclose to the consumer the types of typical costs that can be included in a mortgage finance transaction

• The GFE does not required lenders to disclose the actual costs of your specific loan scenario

• There is a disclaimer on every Good Faith Estimate that reads as follows:



• The information provided reflects estimates of the charges you are likely to incur at the settlement of your loan.

• The fees listed are estimates; actual charges may be more or less. Your transaction may not involve a fee for every item listed.

• The numbers listed beside the estimates generally correspond to the numbered lines contained in the HUD-1 or HUD1A settlement Statement you will receive at settlement.

• The HUD-1 or HUD-1A settlement statement will show you the actual cost of items paid at settlement


• Typical costs involved in Purchase and Refinance transactions

• The Good Faith Estimate is broken down into 2 main sections that itemize costs and fees– Estimated Closing Costs– Estimated Reserve/Prepaid Costs

• Within each section individual costs are broken down by “series number”– Specific costs will be assigned to accompanying

“number” regardless of GFE format


• Fees found under - Estimated Closing Costs• 800 – Items Payable in Connection with the Loan

– 801 – Origination Fee @ _____% + _______

– 802 – Discount Fee @ ______% + _______

– 803 – Appraisal Fee

– 804 – Credit Report

– 805 – Lender’s Inspection Fee

– 806 – MI Application Fee

– 807 – Assumption Fee

– 808 – Mortgage Broker Fee

– 809 – Tax Servicing Fee

– 810 - Processing Fee

– 811 – Underwriting Fee

– 812 – Wire Transfer Fee

– 813 – 823 – Miscellaneous Fees



– 801 – Origination Fee @ _____% + _______

– 802 – Discount Fee @ ______% + _______

– 803 – Appraisal Fee– 804 – Credit Report– 805 – Lender’s Inspection Fee– 806 – MI Application Fee– 807 – Assumption Fee– 808 – Mortgage Broker Fee– 809 – Tax Servicing Fee

– 810 - Processing Fee

– 811 – Underwriting Fee– 812 – Wire Transfer Fee

– 813 – 823 - Miscellaneous Fees - CalSTRS/CalPERS

• Fannie Mae (Adverse Market .25%)

• Fannie Mae (Flex Underwriting .5%)

• Fannie Mae (Credit / LTV %)



– The fees charged by the Lender / Broker and can vary from lender to lender

• Fees can be broken out into smaller fees or combined into larger fees

• “Cost” is usually pretty close from lender to lender

– Fees commonly associated with loan amount• Origination Fee• Discount Fee• CalSTRS/CalPERS - Fannie mae fees


• Fees found under - Estimated Closing Costs

• 1100 – Title Charges– 1101 – Settlement or Closing Fee

– 1102 – Abstract or Title Fee

– 1103 – Title Examination

– 1104 – Title Insurance Binder

– 1105 – Document Preparation Fee

– 1106 – Notary Fee

– 1107 – Attorney Fee

– 1108 – Title Insurance Fee



• 1100 – Title Charges– 1101 – Settlement or Closing Fee– 1102 – Abstract or Title Fee– 1103 – Title Examination– 1104 – Title Insurance Binder– 1105 – Document Preparation Fee

– 1106 – Notary Fee– 1107 – Attorney Fee

– 1108 – Title Insurance Fee



• 1100 – Title Charges

– It is typical for the seller to choose the closing services

• Escrow company• Title insurance company

– Fees can vary VASTLY from Escrow to Escrow• Hundreds to Thousand difference

– Refinances are much, much less expensive• First American Title Company Flat Rate

– Title, Escrow, Notary, Recording



• 1200 – Government Recording and Transfer Charges– 1200 – Recording Fee– 1202 – Local Tax /Stamps– 1203 – State Tax/Stamps

• 1300 – Additional Settlement Charges– 1301 – Survey To:– 1302 – Termite/Pest Inspection:– 1303 – 1309 – Miscellaneous

• Home warranty• HOA dues



• 1200 – Government Recording and Transfer Charges– 1200 – Recording Fee– 1202 – Local Tax /Stamps– 1203 – State Tax/Stamps

• 1300 – Additional Settlement Charges– 1301 – Survey To:

– 1302 – Termite/Pest Inspection:– 1303 – 1309 – Miscellaneous

• Home warranty• HOA dues



• 1200 – Government Recording and Transfer Charges

– Recording fees may vary depending on number of pages / number of loans

– Miscellaneous fees are typically third party fees that can not be controlled


• Fees found under - Estimated Reserve/Pre-paid

• 900 – Items Required by lender to be paid in advance– 901 – Prepaid Interest ___ days @ _____– 902 – Mortgage Insurance Premium– 903 – Hazard Insurance Premium– 904 – Country Property Tax– 905 – VA Funding Fee– 906 – Flood Insurance Premium– 907-908 –Miscellaneous Fees

• All of these fees are typical when appropriate



• 900 – Items Required by lender to be paid in advance

– Interim interest is calculated based on day loan is due to fund to end of month

• This number will not final until the loan funds• Mortgage payments are made in arrears

– Hazard insurance on a GFE is typically estimated • Purchase - .25% of purchase price is typical• Refinance – taken from insurance policy

– Property taxes on a GFE are typically estimated• Purchase – 1.25% of purchase price is typical• Refinance – taken from tax bill or public

record



• 1000 – Reserves Deposited with Lender– 1001 – Hazard Ins ___ mths @ _______– 1002 – Mortgage Ins ___ mths @ _______– 1003 – City Prop. Tax ___ mths @ _______– 1004 – Property Tax ___ mths @ _______– 1006 – Flood Ins ___ mths @ _______– 1007-1009 – Miscellaneous– 1010 – Aggregate Analysis – typically a credit

• Most of these fees are typical when appropriate– Exception is 1003 – City Prop. Tax



• 1000 – Reserves Deposited with Lender

– Reserves are collected up front and held in an “Impound” or “Escrow” account

– Tax reserves depend completely on time of year and first payment date

• 1st half taxes are due on 11/1 and cover period of 7/1 to 12/31 – Delinquent on 12/10

• 2nd half taxes are due on 3/1 and cover the period of 1/1 to 6/30 – Delinquent on 4/10

– Let’s look at an Impound Schedule


• Cost Summary Sections on the GFE

• Total Estimated Monthly Payment• Principal & Interest• Other Financing (P&I)• Hazard Insurance• Real Estate Taxes• Mortgage Insurance• HOA Dues• Other

• Closing Costs Summary– Includes seller paid or non-borrower paid costs

• Total Estimated Funds Needed to Close

• Let’s take a look at some actual GFEs


• Common signs of inaccurate or incomplete Good Faith Estimates

– No origination or Discount points listed– Closing costs missing or estimated low– Taxes and insurance estimated low– Title and Escrow fees estimated low– Careless errors and mistakes– Used to “feature” and interest rate

• Let’s take a look at an example

• For the purpose of budgeting - Would you rather bring in less than estimated or more?



– Interest rates are determined by the markets on a daily and sometimes hourly basis

– Your interest rate is not guaranteed until locked• Purchase – can not lock until you have a

property address

– There are many factors that go into determining your interest rate

• Credit scores, Loan amount, Loan to value, Loan purpose, condominium, occupancy

• Interest rate is the most abused loss leader in the mortgage industry!



• The most common “excuse” that brokers, lenders and loan officers have for a change in rate is……………

– “Well, the interest rates change on a daily basis and that was the rate at the time, on that particular day”

• How can you argue with that, right?

You can now!


Wrap up and Take Aways

• Closing costs and interest rates do not vary greatly from lender to lender usually

• Do your homework: Look to the WSJ, Times or on-line for National Mortgage Interest Rate averages

• It’s better to be safe than sorry when it comes to estimating what costs could be associated with your transaction

• If your lender, broker or loan officer is not explaining the costs completely…keep asking questions

• Use the errrr….ummmmm….test



– We are a direct Lender that specializes in CalSTRS, CalPERS, CalHFA and Community based down payment assistance programs

– We are a direct Lender that specializes in FHA & VA Refinance, Streamline and Purchase loans.

– We are more than happy to be your “second opinion” if you are already working with someone

– We are committed to educating and empowering homeowners - Join us for future classes



– You will receive a “Thank you” email with links to the information we’ve talked about here today

• Copy of power point presentation• Secure on-line loan application• Links to tools and resources we talk about in

all of our classes• Dream Home Finder request• A schedule of all upcoming classes

Upcoming Home Buyer Classes

• A First Time Home buyer’s Complete Guide to Credit, Qualifying and Completing the Loan Application

• A Complete Guide to Buying Foreclosures and Short Sales

• A Complete Guide to the CalSTRS 80/17 purchase loan

• A Complete Guide to the CalPERS Home Loan Program – No down option

• A First Time Home Buyer’s Complete Guide to Hiring a Real Estate Agent and Finding the Best Deals

• A Complete Guide to FHA Purchase and Refinance Loan Options

Check back often for upcoming classes

Thank you for Attending

You input is ValuablePlease complete 3 question

survey when you log off

Presented By:Broadview Mortgage Corp.

Presenter:

Scott Schang

Contact Information:

Phone: [email protected]

a complete guide to closing costs and the the good faith estimate - presented 1-22-09

Education

title fee

underwriting fee

assumption fee

processing fee

appraisal fee

closing costs

notary fee

attorney fee