Guest jeeptravel Posted October 2, 2004 Report Share Posted October 2, 2004 What's the deal with these things? There seems to be so much contradiction. One on this board states that she paid $200 in closing costs, whereas another assures me I wil never find a way to keep them that low. I'm having trouble understanding why closig costs can't just be absorbed by the loan. Can anyone help? Please be specific as I get confused by generalities! LOL Thanks a lot. -D Link to comment Share on other sites More sharing options...
liverichly Posted October 2, 2004 Report Share Posted October 2, 2004 There are different costs associated with each loan. The costs are made up into two parts, closing costs and pre-paid items... which together make up the settlement costs.Closing costs are what is paid to each entity that needs to be involved in getting your mortgage completed. This can be different in every state. Closing costs pay the broker, lender, appraiser, escrow company, title company, surveyer, home inspector, termite inspector, etc. These fees could be origination fee, underwriting fee, funding fee, escrow fee, title insurance, title examnination, mortgage tax (in a few select states), notary fees, etc.Pre-paid items are items that you will have to pay anyway but you are pre-paying them through the close of escrow.. such as if you set up an escrow account (where you pay your taxes & insurance through the mortgage payment rather than to the county treasurer and insurance agent directly) then the lender will require a few months of reserves as well as any months of impounds you need to deposit so they will have enough to pay the treasurer and agent when that time comes. It is also made up of pre-paid interest because interest is paid in arrears - a December 1st payment pays for the interest on the money you borrowed during the month of November, example: if you close a loan on October 10th your first payment won't be November 1st, it'll be December 1st. The reason being is because the lender might not have enough time to get you the mortgage payment coupon by the required date. So with all of this said, at closing they are going to charge you 21 days of interest up to October 31st, because you won't be paying a November 1st payment which would've paid that interest.So the reason that settlement costs are completely different is because they are getting a mortgage in different states, from different lenders, using different closing services, and each state has different times of the year in which property taxes are due and how many times they are collected.One thing that any loan officer should do is request an Estimated HUD. This document can be obtained at ANY time during the loan process as long as an escrow/closing company is involved. All the loan officer needs to supply the closer is a Good Faith Estimate with their fees, and the closer will draft up something with all of their fees... then the only unknowns will be the pre-paid items, unless something changes with the loan. Link to comment Share on other sites More sharing options...
Guest jeeptravel Posted October 2, 2004 Report Share Posted October 2, 2004 Okay (thanks by the way) so you are saying that that good faith write up can be absorbed in the loan? My question is that I want to know why it seems impossible to start a home mortgage without payig 1,000's of dollars out of pocket.Thanks-D Link to comment Share on other sites More sharing options...
liverichly Posted October 2, 2004 Report Share Posted October 2, 2004 you are saying that that good faith write up can be absorbed in the loan?On a refinance, FHA, or 103% financing only. If you are doing a conventional mortgage, you are required to pay the closing costs out of pocket (whose pocket I'll discuss next).My question is that I want to know why it seems impossible to start a home mortgage without payig 1,000's of dollars out of pocket.It isn't, you just need a good real estate agent. I've taught quite a few on how to retain clients who have very little in terms of down payment. Say the closing costs will be $4,000 and you, the buyer, don't have it. What a real estate agent should be able to do is negotiate the sales price higher by $4,000 and also have the sellers credit you $4,000 at closing. No money down 100% financing. Typically the maximum contributions from a seller can not exceed 6%. Link to comment Share on other sites More sharing options...
firstsource Posted October 4, 2004 Report Share Posted October 4, 2004 There are some limits to this however:Lenders will allow between 3 and 6% of NRCC to be paid for by the seller. It depends on the lender as to the exact amount. Most lenders will not allow RCC to be paid for by the sellers.NRCC: Non Recurring Closing Costs: Just associated with the loan closingRCC: Recurring Closing Cost: On going costs, ie Taxes, Insurance, Interest (Most times there is an amount of "pre-paid" interest involved, it pays the interest from the closing date to the 1st of the month, which is when most loans start. (then you get a "free" month, as you are charged interest after it is owed, whereas rent you pay in advance)So, you can get into a home for very little, but not 0 normally. Charles Link to comment Share on other sites More sharing options...
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