IS THIS ALL GOING TO COST?
At Valley Mortgage we dissect
the expenses associated with any transaction into four
categories collectively called "CASH REQUIREMENTS".
We use this phrase specifically because it encompasses
everything and helps avoid the confusion generated in the
industry about what constitutes closing costs. We
typically at the start prepare for you a loan estimate. This is an industry tool which
itemizes all the related cash requirements. It is the
case that many of the expenses associated with financing have
almost become standardized. The differences a borrowers
experiences from one company to another lies how thoroughly
these expenses are reviewed.
Costs are just that - one
time expenses associated with the loan application. These
include the appraisal fee, the credit report fee, title
insurance charge, the mortgage tax, the bank attorney fee, the
flood certification fee, the tax service fee, the underwriting
fee, the doc prep fee or other bank "junk fee". Most
of these expenses you pay at closing. At the start of the
application process you spend some money, typically a few
hundred dollars to cover the application fee, the appraisal
fee and the credit report.
POINTS are a cost. A point is
1% of the loan amount. For conventional financing most
borrowers chose a no-point loan. Typically, a borrower pays
points in conjunction with an alternative program for the
income or credit impaired borrower. While it is rare, if
points are required by the loan program you know that at the
Prepaids & Escrows
These are not costs. They are
cash requirements that you, the borrower, pay at the time of
closing regardless of your financing. Prepaids & escrows
include the first year homeowner's insurance premium, the
rebate to the seller for real estate taxes already paid on the
subject property, and the funds required to set up an escrow
account for the payment by the lender of future property
taxes. Sometimes a lender will allow the borrower to
waive the escrow requirement.
This speaks for itself. The
down payment simply is the difference between your loan amount
and the purchase price. Almost every program has a down
payment requirement. There are very specific rules about the
source and proof of down payment monies.
There are some expenses
typically not revealed on a good faith estimate.
Nevertheless they exist. You should allow yourself some
additional reserves to cover the cost of your own personal
attorney (in a purchase transaction), the cost of your own
title insurance (as compared to the lender policy) and the
cost any home inspections or survey you may chose to secure.
Again, our reviewing these items helps you form a more