a guide to closing costs & gfe
DESCRIPTION
A copy of the presentation, updated and uploaded March 26,2009TRANSCRIPT
Where homeownership education takes flight!
A Complete Guide to Understanding Closing Costsand the Good Faith Estimate
Sponsored by
Broadview Mortgage Corporation
1-866-667-6724
Where homeownership education takes flight!
Understanding Closing Costs & GFE
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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• The original intention behind providing you with a Good Faith Estimate - GFE
• 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:
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• The original intention behind providing you with a Good Faith Estimate - GFE
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• 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 - CalSTRS/CalPERS• Fannie Mae (Adverse Market .25%)• Fannie Mae (Flex Underwriting .5%)• Fannie Mae (Credit / LTV %)
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• Fees found under - Estimated Closing Costs
• 800 – Items Payable in Connection with the Loan
– 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• Fees found under - Estimated Closing Costs
• 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 have lower title and escrow fees• First American Title Company Flat Rate
– Title, Escrow, Notary, Recording
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• Fees found under - Estimated Closing Costs
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• Fees found under - Estimated Closing Costs
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• Fees found under - Estimated Closing Costs
• 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
• 1300 – Additional Settlement Charges
– It is common for the seller to pay for the termite inspection
– HOA dues are typical when buying a condominium, townhome or a PUD
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• Fees found under - Estimated Reserve/Pre-paid
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• Fees found under - Estimated Reserve/Pre-paid
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• 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?
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• The Dangers of Shopping for Interest Rate
– 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!
Where homeownership education takes flight!
Understanding Closing Costs & GFE
• The Dangers of Shopping for Interest Rate
• 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!
Where homeownership education takes flight!
Understanding Closing Costs & GFE
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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
Wrap up and Take Aways
• 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 can refer you to a qualified Real Estate Agent in your area to help you search for homes
• 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
Where homeownership education takes flight!
Understanding Closing Costs & GFE
Wrap up and Take Aways
– 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• Updated information on Federal Tax Credit
– Increased to $8,000 – Not paid back• Link to national averages for interest rates
• A schedule of all upcoming classes
Where homeownership education takes flight!
Upcoming Homebuyer Classes
• Hiring a Real Estate Agent and Finding the Best Deals
• A Complete Guide to the CalSTRS 80/17 purchase program
• A Complete Guide to Buying Foreclosures and Short Sales
• A Complete Guide to FHA Purchase Loans
• A Complete Guide to the CalPERS Home Loan Program
• Five 100% Financing Loans You Should Know About
• Working to record and archive all classes for viewing anytime – I will keep you updated
Check back often for upcoming classes
Where homeownership education takes flight!
Thank You for AttendingIf you enjoyed this class – Tell a friend
For more information
1-866-667-6724Presented by
Scott SchangSponsored by
Broadview Mortgage Corporation