A Complete Guide to Understanding Closing Costs and the Good Faith Estimate <ul><li>Sponsored by </li></ul><ul><li>Broadvi...
Understanding Closing Costs & GFE <ul><li>Topics We Will Cover In This Class </li></ul><ul><li>The original intention behi...
Understanding Closing Costs & GFE <ul><li>Ask Questions throughout presentation </li></ul><ul><li>You may type questions i...
Understanding Closing Costs & GFE <ul><li>The original intention behind providing you with a Good Faith Estimate - GFE </l...
Understanding Closing Costs & GFE <ul><li>The original intention behind providing you with a Good Faith Estimate - GFE </l...
Understanding Closing Costs & GFE <ul><li>Typical costs involved in Purchase and Refinance transactions </li></ul><ul><li>...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>800 – Items Payable...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>800 – Items Payable...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>800 – Items Payable...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1100 – Title Charge...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1100 – Title Charge...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1100 – Title Charge...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1200 – Government R...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1200 – Government R...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1200 – Government R...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Reserve/Pre-paid </li></ul><ul><li>900 – Items Requ...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Reserve/Pre-paid </li></ul><ul><li>900 – Items Requ...
Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Reserve/Pre-paid </li></ul><ul><li>1000 – Reserves ...
Understanding Closing Costs & GFE <ul><li>Cost Summary Sections on the GFE </li></ul><ul><li>Total Estimated Monthly Payme...
Understanding Closing Costs & GFE <ul><li>Common signs of inaccurate or incomplete Good Faith Estimates </li></ul><ul><ul>...
Understanding Closing Costs & GFE <ul><li>The Dangers of Shopping for Interest Rate </li></ul><ul><ul><li>Interest rates a...
Understanding Closing Costs & GFE <ul><li>The Dangers of Shopping for Interest Rate </li></ul><ul><li>The most common “exc...
Understanding Closing Costs & GFE <ul><li>Wrap up and Take Aways </li></ul><ul><li>Closing costs and interest rates do not...
Understanding Closing Costs & GFE <ul><li>Wrap up and Take Aways </li></ul><ul><li>We are a direct Lender that specializes...
Understanding Closing Costs & GFE <ul><li>Wrap up and Take Aways </li></ul><ul><ul><li>You will receive a “Thank you” emai...
Upcoming Homebuyer Classes <ul><li>Hiring a Real Estate Agent and Finding the Best Deals </li></ul><ul><li>A Complete Guid...
Thank You for Attending If you enjoyed this class – Tell a friend   <ul><li>For more information </li></ul><ul><li>1-866-...
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A Guide To Closing Costs & GFE

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A Guide To Closing Costs & GFE

  1. 1. A Complete Guide to Understanding Closing Costs and the Good Faith Estimate <ul><li>Sponsored by </li></ul><ul><li>Broadview Mortgage Corporation </li></ul><ul><li>1-866-667-6724 </li></ul>
  2. 2. Understanding Closing Costs & GFE <ul><li>Topics We Will Cover In This Class </li></ul><ul><li>The original intention behind providing you with a Good Faith Estimate - GFE </li></ul><ul><li>A Complete Breakdown of typical costs involved in Purchase and Refinance transactions </li></ul><ul><li>Common signs of inaccurate or incomplete Good Faith Estimates </li></ul><ul><li>The Dangers of Shopping for Interest Rate </li></ul>
  3. 3. Understanding Closing Costs & GFE <ul><li>Ask Questions throughout presentation </li></ul><ul><li>You may type questions in at any time during the presentation – Question and Answer box on your screen / Control panel </li></ul><ul><li>Specialists are standing by to answer your questions during the presentation </li></ul><ul><li>This is an interactive learning environment. You will get the most value by having your specific questions answered </li></ul><ul><li>The only dumb question is the one you don’t ask </li></ul><ul><li>Write number down now in case you get disconnected </li></ul><ul><ul><li>1-866-667-6724 </li></ul></ul>
  4. 4. Understanding Closing Costs & GFE <ul><li>The original intention behind providing you with a Good Faith Estimate - GFE </li></ul><ul><li>Disclose to the consumer the types of typical costs that can be included in a mortgage finance transaction </li></ul><ul><li>The GFE does not required lenders to disclose the actual costs of your specific loan scenario </li></ul><ul><li>There is a disclaimer on every Good Faith Estimate that reads as follows: </li></ul>
  5. 5. Understanding Closing Costs & GFE <ul><li>The original intention behind providing you with a Good Faith Estimate - GFE </li></ul><ul><li>The information provided reflects estimates of the charges you are likely to incur at the settlement of your loan. </li></ul><ul><li>The fees listed are estimates; actual charges may be more or less. Your transaction may not involve a fee for every item listed. </li></ul><ul><li>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. </li></ul><ul><li>The HUD-1 or HUD-1A settlement statement will show you the actual cost of items paid at settlement </li></ul>
  6. 6. Understanding Closing Costs & GFE <ul><li>Typical costs involved in Purchase and Refinance transactions </li></ul><ul><li>The Good Faith Estimate is broken down into 2 main sections that itemize costs and fees </li></ul><ul><ul><li>Estimated Closing Costs </li></ul></ul><ul><ul><li>Estimated Reserve/Prepaid Costs </li></ul></ul><ul><li>Within each section individual costs are broken down by “series number” </li></ul><ul><ul><li>Specific costs will be assigned to accompanying “number” regardless of GFE format </li></ul></ul>
  7. 7. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>800 – Items Payable in Connection with the Loan </li></ul><ul><ul><li>801 – Origination Fee @ _____% + _______ </li></ul></ul><ul><ul><li>802 – Discount Fee @ ______% + _______ </li></ul></ul><ul><ul><li>803 – Appraisal Fee </li></ul></ul><ul><ul><li>804 – Credit Report </li></ul></ul><ul><ul><li>805 – Lender’s Inspection Fee </li></ul></ul><ul><ul><li>806 – MI Application Fee </li></ul></ul><ul><ul><li>807 – Assumption Fee </li></ul></ul><ul><ul><li>808 – Mortgage Broker Fee </li></ul></ul><ul><ul><li>809 – Tax Servicing Fee </li></ul></ul><ul><ul><li>810 - Processing Fee </li></ul></ul><ul><ul><li>811 – Underwriting Fee </li></ul></ul><ul><ul><li>812 – Wire Transfer Fee </li></ul></ul><ul><ul><li>813 – 823 – Miscellaneous Fees </li></ul></ul>
  8. 8. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>800 – Items Payable in Connection with the Loan </li></ul><ul><ul><li>801 – Origination Fee @ _____% + _______ </li></ul></ul><ul><ul><li>802 – Discount Fee @ ______% + _______ </li></ul></ul><ul><ul><li>803 – Appraisal Fee </li></ul></ul><ul><ul><li>804 – Credit Report </li></ul></ul><ul><ul><li>805 – Lender’s Inspection Fee </li></ul></ul><ul><ul><li>806 – MI Application Fee </li></ul></ul><ul><ul><li>807 – Assumption Fee </li></ul></ul><ul><ul><li>808 – Mortgage Broker Fee </li></ul></ul><ul><ul><li>809 – Tax Servicing Fee </li></ul></ul><ul><ul><li>810 - Processing Fee </li></ul></ul><ul><ul><li>811 – Underwriting Fee </li></ul></ul><ul><ul><li>812 – Wire Transfer Fee </li></ul></ul><ul><ul><li>813 – 823 - Miscellaneous Fees - CalSTRS/CalPERS </li></ul></ul><ul><ul><ul><li>Fannie Mae (Adverse Market .25%) </li></ul></ul></ul><ul><ul><ul><li>Fannie Mae (Flex Underwriting .5%) </li></ul></ul></ul><ul><ul><ul><li>Fannie Mae (Credit / LTV %) </li></ul></ul></ul>
  9. 9. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>800 – Items Payable in Connection with the Loan </li></ul><ul><ul><li>The fees charged by the Lender / Broker and can vary from lender to lender </li></ul></ul><ul><ul><ul><li>Fees can be broken out into smaller fees or combined into larger fees </li></ul></ul></ul><ul><ul><ul><li>“ Cost” is usually pretty close from lender to lender </li></ul></ul></ul><ul><ul><li>Fees commonly associated with loan amount </li></ul></ul><ul><ul><ul><li>Origination Fee </li></ul></ul></ul><ul><ul><ul><li>Discount Fee </li></ul></ul></ul><ul><ul><ul><li>CalSTRS/CalPERS - Fannie mae fees </li></ul></ul></ul>
  10. 10. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1100 – Title Charges </li></ul><ul><ul><li>1101 – Settlement or Closing Fee </li></ul></ul><ul><ul><li>1102 – Abstract or Title Fee </li></ul></ul><ul><ul><li>1103 – Title Examination </li></ul></ul><ul><ul><li>1104 – Title Insurance Binder </li></ul></ul><ul><ul><li>1105 – Document Preparation Fee </li></ul></ul><ul><ul><li>1106 – Notary Fee </li></ul></ul><ul><ul><li>1107 – Attorney Fee </li></ul></ul><ul><ul><li>1108 – Title Insurance Fee </li></ul></ul>
  11. 11. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1100 – Title Charges </li></ul><ul><ul><li>1101 – Settlement or Closing Fee </li></ul></ul><ul><ul><li>1102 – Abstract or Title Fee </li></ul></ul><ul><ul><li>1103 – Title Examination </li></ul></ul><ul><ul><li>1104 – Title Insurance Binder </li></ul></ul><ul><ul><li>1105 – Document Preparation Fee </li></ul></ul><ul><ul><li>1106 – Notary Fee </li></ul></ul><ul><ul><li>1107 – Attorney Fee </li></ul></ul><ul><ul><li>1108 – Title Insurance Fee </li></ul></ul>
  12. 12. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1100 – Title Charges </li></ul><ul><ul><li>It is typical for the seller to choose the closing services </li></ul></ul><ul><ul><ul><li>Escrow company </li></ul></ul></ul><ul><ul><ul><li>Title insurance company </li></ul></ul></ul><ul><ul><li>Fees can vary VASTLY from Escrow to Escrow </li></ul></ul><ul><ul><ul><li>Hundreds to Thousand difference </li></ul></ul></ul><ul><ul><li>Refinances have lower title and escrow fees </li></ul></ul><ul><ul><ul><li>First American Title Company Flat Rate </li></ul></ul></ul><ul><ul><ul><ul><li>Title, Escrow, Notary, Recording </li></ul></ul></ul></ul>
  13. 13. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1200 – Government Recording and Transfer Charges </li></ul><ul><ul><li>1200 – Recording Fee </li></ul></ul><ul><ul><li>1202 – Local Tax /Stamps </li></ul></ul><ul><ul><li>1203 – State Tax/Stamps </li></ul></ul><ul><li>1300 – Additional Settlement Charges </li></ul><ul><ul><li>1301 – Survey To: </li></ul></ul><ul><ul><li>1302 – Termite/Pest Inspection: </li></ul></ul><ul><ul><li>1303 – 1309 – Miscellaneous </li></ul></ul><ul><ul><ul><li>Home warranty </li></ul></ul></ul><ul><ul><ul><li>HOA dues </li></ul></ul></ul>
  14. 14. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1200 – Government Recording and Transfer Charges </li></ul><ul><ul><li>1200 – Recording Fee </li></ul></ul><ul><ul><li>1202 – Local Tax /Stamps </li></ul></ul><ul><ul><li>1203 – State Tax/Stamps </li></ul></ul><ul><li>1300 – Additional Settlement Charges </li></ul><ul><ul><li>1301 – Survey To: </li></ul></ul><ul><ul><li>1302 – Termite/Pest Inspection: </li></ul></ul><ul><ul><li>1303 – 1309 – Miscellaneous </li></ul></ul><ul><ul><ul><li>Home warranty </li></ul></ul></ul><ul><ul><ul><li>HOA dues </li></ul></ul></ul>
  15. 15. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Closing Costs </li></ul><ul><li>1200 – Government Recording and Transfer Charges </li></ul><ul><ul><li>Recording fees may vary depending on number of pages / number of loans </li></ul></ul><ul><ul><li>Miscellaneous fees are typically third party fees that can not be controlled </li></ul></ul><ul><li>1300 – Additional Settlement Charges </li></ul><ul><ul><li>It is common for the seller to pay for the termite inspection </li></ul></ul><ul><ul><li>HOA dues are typical when buying a condominium, townhome or a PUD </li></ul></ul>
  16. 16. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Reserve/Pre-paid </li></ul><ul><li>900 – Items Required by lender to be paid in advance </li></ul><ul><ul><li>901 – Prepaid Interest ___ days @ _____ </li></ul></ul><ul><ul><li>902 – Mortgage Insurance Premium </li></ul></ul><ul><ul><li>903 – Hazard Insurance Premium </li></ul></ul><ul><ul><li>904 – Country Property Tax </li></ul></ul><ul><ul><li>905 – VA Funding Fee </li></ul></ul><ul><ul><li>906 – Flood Insurance Premium </li></ul></ul><ul><ul><li>907-908 –Miscellaneous Fees </li></ul></ul><ul><li>All of these fees are typical when appropriate </li></ul>
  17. 17. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Reserve/Pre-paid </li></ul><ul><li>900 – Items Required by lender to be paid in advance </li></ul><ul><ul><li>Interim interest is calculated based on day loan is due to fund to end of month </li></ul></ul><ul><ul><ul><li>This number will not final until the loan funds </li></ul></ul></ul><ul><ul><ul><li>Mortgage payments are made in arrears </li></ul></ul></ul><ul><ul><li>Hazard insurance on a GFE is typically estimated </li></ul></ul><ul><ul><ul><li>Purchase - .25% of purchase price is typical </li></ul></ul></ul><ul><ul><ul><li>Refinance – taken from insurance policy </li></ul></ul></ul><ul><ul><li>Property taxes on a GFE are typically estimated </li></ul></ul><ul><ul><ul><li>Purchase – 1.25% of purchase price is typical </li></ul></ul></ul><ul><ul><ul><li>Refinance – taken from tax bill or public record </li></ul></ul></ul>
  18. 18. Understanding Closing Costs & GFE <ul><li>Fees found under - Estimated Reserve/Pre-paid </li></ul><ul><li>1000 – Reserves Deposited with Lender </li></ul><ul><ul><li>Reserves are collected up front and held in an “Impound” or “Escrow” account </li></ul></ul><ul><ul><li>Tax reserves depend completely on time of year and first payment date </li></ul></ul><ul><ul><ul><li>1 st half taxes are due on 11/1 and cover period of 7/1 to 12/31 – Delinquent on 12/10 </li></ul></ul></ul><ul><ul><ul><li>2 nd half taxes are due on 3/1 and cover the period of 1/1 to 6/30 – Delinquent on 4/10 </li></ul></ul></ul><ul><ul><li>Let’s look at an Impound Schedule </li></ul></ul>
  19. 19. Understanding Closing Costs & GFE <ul><li>Cost Summary Sections on the GFE </li></ul><ul><li>Total Estimated Monthly Payment </li></ul><ul><ul><ul><li>Principal & Interest </li></ul></ul></ul><ul><ul><ul><li>Other Financing (P&I) </li></ul></ul></ul><ul><ul><ul><li>Hazard Insurance </li></ul></ul></ul><ul><ul><ul><li>Real Estate Taxes </li></ul></ul></ul><ul><ul><ul><li>Mortgage Insurance </li></ul></ul></ul><ul><ul><ul><li>HOA Dues </li></ul></ul></ul><ul><ul><ul><li>Other </li></ul></ul></ul><ul><li>Closing Costs Summary </li></ul><ul><ul><li>Includes seller paid or non-borrower paid costs </li></ul></ul><ul><li>Total Estimated Funds Needed to Close </li></ul><ul><li>Let’s take a look at some actual GFEs </li></ul>
  20. 20. Understanding Closing Costs & GFE <ul><li>Common signs of inaccurate or incomplete Good Faith Estimates </li></ul><ul><ul><li>No origination or Discount points listed </li></ul></ul><ul><ul><li>Closing costs missing or estimated low </li></ul></ul><ul><ul><li>Taxes and insurance estimated low </li></ul></ul><ul><ul><li>Title and Escrow fees estimated low </li></ul></ul><ul><ul><li>Careless errors and mistakes </li></ul></ul><ul><ul><li>Used to “feature” and interest rate </li></ul></ul><ul><ul><ul><li>Let’s take a look at an example </li></ul></ul></ul><ul><li>For the purpose of budgeting - Would you rather bring in less than estimated or more? </li></ul>
  21. 21. Understanding Closing Costs & GFE <ul><li>The Dangers of Shopping for Interest Rate </li></ul><ul><ul><li>Interest rates are determined by the markets on a daily and sometimes hourly basis </li></ul></ul><ul><ul><li>Your interest rate is not guaranteed until locked </li></ul></ul><ul><ul><ul><li>Purchase – can not lock until you have a property address </li></ul></ul></ul><ul><ul><li>There are many factors that go into determining your interest rate </li></ul></ul><ul><ul><ul><li>Credit scores, Loan amount, Loan to value, Loan purpose, condominium, occupancy </li></ul></ul></ul><ul><li>Interest rate is the most abused loss leader in the mortgage industry! </li></ul>
  22. 22. Understanding Closing Costs & GFE <ul><li>The Dangers of Shopping for Interest Rate </li></ul><ul><li>The most common “excuse” that brokers, lenders and loan officers have for a change in rate is…………… </li></ul><ul><ul><li>“ Well, the interest rates change on a daily basis and that was the rate at the time, on that particular day” </li></ul></ul><ul><li>How can you argue with that, right? </li></ul><ul><li>You can now! </li></ul>
  23. 23. Understanding Closing Costs & GFE <ul><li>Wrap up and Take Aways </li></ul><ul><li>Closing costs and interest rates do not vary greatly from lender to lender usually </li></ul><ul><li>Do your homework: Look to the WSJ, Times or on-line for National Mortgage Interest Rate averages </li></ul><ul><li>It’s better to be safe than sorry when it comes to estimating what costs could be associated with your transaction </li></ul><ul><li>If your lender, broker or loan officer is not explaining the costs completely…keep asking questions </li></ul><ul><li>Use the errrr….ummmmm….test </li></ul>
  24. 24. Understanding Closing Costs & GFE <ul><li>Wrap up and Take Aways </li></ul><ul><li>We are a direct Lender that specializes in CalSTRS, CalPERS, CalHFA and Community based down payment assistance programs </li></ul><ul><li>We are a direct Lender that specializes in FHA & VA Refinance, Streamline and Purchase loans. </li></ul><ul><li>We can refer you to a qualified Real Estate Agent in your area to help you search for homes </li></ul><ul><li>We are more than happy to be your “second opinion” if you are already working with someone </li></ul><ul><li>We are committed to educating and empowering homeowners - Join us for future classes </li></ul>
  25. 25. Understanding Closing Costs & GFE <ul><li>Wrap up and Take Aways </li></ul><ul><ul><li>You will receive a “Thank you” email with links to the information we’ve talked about here today </li></ul></ul><ul><ul><ul><li>Copy of power point presentation </li></ul></ul></ul><ul><ul><ul><li>Secure on-line loan application </li></ul></ul></ul><ul><ul><ul><li>Links to tools and resources we talk about in all of our classes </li></ul></ul></ul><ul><ul><ul><li>Dream Home Finder request </li></ul></ul></ul><ul><ul><ul><li>Updated information on Federal Tax Credit </li></ul></ul></ul><ul><ul><ul><ul><li>Increased to $8,000 – Not paid back </li></ul></ul></ul></ul><ul><ul><ul><li>Link to national averages for interest rates </li></ul></ul></ul><ul><ul><ul><li>A schedule of all upcoming classes </li></ul></ul></ul>
  26. 26. Upcoming Homebuyer Classes <ul><li>Hiring a Real Estate Agent and Finding the Best Deals </li></ul><ul><li>A Complete Guide to the CalSTRS 80/17 purchase program </li></ul><ul><li>A Complete Guide to Buying Foreclosures and Short Sales </li></ul><ul><li>A Complete Guide to FHA Purchase Loans </li></ul><ul><li>A Complete Guide to the CalPERS Home Loan Program </li></ul><ul><li>Five 100% Financing Loans You Should Know About </li></ul><ul><li>Working to record and archive all classes for viewing anytime – I will keep you updated </li></ul><ul><li>Check back often for upcoming classes </li></ul>
  27. 27. Thank You for Attending If you enjoyed this class – Tell a friend  <ul><li>For more information </li></ul><ul><li>1-866-667-6724 </li></ul><ul><li>Presented by </li></ul><ul><li>Scott Schang </li></ul><ul><li>Sponsored by </li></ul><ul><li>Broadview Mortgage Corporation </li></ul>

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