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A Guide To Closing Costs & GFE

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A copy of the presentation, updated and uploaded March 26,2009

A copy of the presentation, updated and uploaded March 26,2009

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  • 1. A Complete Guide to Understanding Closing Costs and the Good Faith Estimate
    • Sponsored by
    • Broadview Mortgage Corporation
    • 1-866-667-6724
  • 2. 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
  • 3. 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
  • 4. 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:
  • 5. 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
  • 6. 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
  • 7. 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
  • 8. 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 %)
  • 9. 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
  • 10. 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
  • 11. 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
  • 12. 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
  • 13. 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
  • 14. 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
  • 15. 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
  • 16. 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
  • 17. 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
  • 18. 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
        • 1 st half taxes are due on 11/1 and cover period of 7/1 to 12/31 – Delinquent on 12/10
        • 2 nd 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
  • 19. 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
  • 20. 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?
  • 21. 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!
  • 22. 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!
  • 23. 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
  • 24. 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
  • 25. 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
  • 26. 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
  • 27. Thank You for Attending If you enjoyed this class – Tell a friend 
    • For more information
    • 1-866-667-6724
    • Presented by
    • Scott Schang
    • Sponsored by
    • Broadview Mortgage Corporation

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