Title/Mortgage Experts ???

[robynhgl]

Finally got all my acceptances thru FHA and the title company has my file and is getting it ready for the closing.

BUT---(I swear--if something could go wrong in this process, it does!) I get a call from the person who is handling my loan. He gives me a general idea of the closing costs. I know it's just an approximate figure, the title company will be exact. When I went over the purchase agreement with my agent I had asked for and been given a 6% concession. The terms from the seller (a bank) were that $900.00 of that concession be specifically earmarked for the title company. This was explained as being the fees associated with my title insurance and incurred fees for closing.

When I spoke to my LO he stated that I am now obligated to pay $2000.00 for the title work and insurance. My title insurance, FannieMae title insurance and the other fees.

Now I'm being told that I was notified that the $900 was for the FMTI and in addition to my title insurance and fees. Maybe I'm not to smart--but until the LO told me yesterday the I was paying for the FMTI I had no idea that title insurance was also required. I have no problem paying $900 for MY title insurance and fees. BUT am I now obligated to pay the FMTI also? It does not state that I am responsible for the FMTI anywhere on the purchase agreement. Only that I incur the expense of MY title insurance and the fees associated with them.

This closing is already behind schedule and the bank is charging a $100 per day fine for closing after the agreed upon date. My LO is being hit with the fine (he did nothing wrong--it was the backlog at FHA that held things up). If I fight this can they rescind the agreement because the closing had to be extended? If I fight it because the agent for the bank did not put that specific earmark for the FMTI in the contract and it further delays the closing can they still impose the fine-even if it's their mistake?

What can I do? Thanks!

[LVMortgageMom]

Technically, you are in breach of your contract with the seller of the home. So they could decide to walk away from the deal. It is probably not in their best interest though. If your LO is personally responsible for the fine, then I would guess that there was a lapse on his part, like not requeting the VOE in a timely fashion.

If there was a $900 concession made by the seller, then the items that it covered are kinda inconsequential. What I mean is that your final numbers would not change. Go back to your original GFE and see what type of fees are being disclosed for your title insurance.

If the additional money that you need is a deal breaker, you could ask your real estate agent to make a concession towards closing costs. They don't like to, but they can. Though, it may delay your closing even more, because the underwriters may have to sign off on it.

I'm not sure where you are located, or if that even makes a difference, but all of the mortgages that I have worked on, with the exception new construction, have stipulated that it was the buyer's responsibility to pay for both of the title insurance policies.

[jq26]

I purchased FHA last April and I don't recall a second title insurance fee. Just one fat fee from my title insurer (no separate FMTI). Then upfront MI of 1.5%.

Second, the concession from the seller is not allocated to certain things. The $8k the seller brought was dumped in the pot (so to speak) so that I just brought $8k less to the table with the certified check.

This is the first I heard of FMTI. Why pay for duplicate title insurance?

[robynhgl]

The 6% I asked for and was granted can be used for costs that are allowed by FHA. I can use that money for any of those allowable costs. However, the seller specified that I must use $900 of that money to pay for my title insurance. (Which I believe is the norm both for the contract and the cost.)

I am wondering if the seller stipulated that a specific amount (900) must be used for my title work, how can they turn around and tack on another $1100 for title insurance that I was not even told about?

Sorry if I'm confusing....this stuff has me really baffled.

[jq26]

The seller is sort of out of this as I see it. They wanted $900 allocated to title insurance and they'll get their wish. The question is, why are you just finding out about an additional $1100 in title insurance? There are fees and there are insurance costs. At least in my state, insurance costs are set on the amount of the property. And they are disclosed in the GFE and then more precisely in the HUD-1. Maybe the insurance is $900 and the fees and transfer costs are $1100 more? I'd call your title company and/or broker/lender.

By the time you go to the table, you should know where every signle penny is going on your statement.

With that said, title transfer is expensive. Here in PA, it was 4% just in transfer TAX. Lump sum that gets paid to city/state that is gone foreever. Title fees / insurance were $2000 in my case, or somewhere thereabouts.

I think I brought $16,500 to the table, and only $2500 of it went down as a down payment. Every other dollar went towards fees, tax, MI, and buydown amount.

Give your title company a call. And ask for them to account for every cost line by line. Make them work for their money. Title companies are a gravy train. The least they can do is put you at ease that you aren't getting ripped off.

[LVMortgageMom]

As far as I know, there are always 2 title insurance policies; 1 for the lender and 1 for the buyer. I've seen instances where the buyer had to pay for both and instances where the buyer paid for the one covering the lender and the seller paid for the one covering the buyer.

Get a copy of the estimated HUD 1 so that you can see what each of these charges are and how the sellers concessionis being allocated.

[robynhgl]

Thanks.

I think that the title insurance that they want me to pay for is supposed to be paid by the seller, they just didn't spell it out in the purchase agreement and the $900. stipulated was not explained or stated as being specifically for THAT title insurance. I agreed to the condition that the money be used to pay the title company for MY insurance and the expenses incurred for closing.

I'm wondering if I can hold them to the purchase agreement? Anything (expenses, other insurance besides mine, etc) over that amount should be their obligation since they specified that I had to cover the closing costs in the amount of 900....

[firstsource]

I would suggest that you read your purchase agreement. In the fine print it will say something about the seller having to provide clear title. So they pay what is in effect the lenders insurance.

Then the buyers insurance is up to you to pay. Typically it is in the 300 range and it is an option. The title company will insist that you buy it, but they are making a lot of money on that part of the policy and it is in their best interest to sell you on the policy.

Yes, you are taking a bit of a risk on loosing your investment in your home if it ends up that there was a title error. I would suggest that you take some time and research on the internet the number of times that a title company has had to pay the insurance.

Charles

[Magdalen77]

The seller is sort of out of this as I see it. They wanted $900 allocated to title insurance and they'll get their wish. The question is, why are you just finding out about an additional $1100 in title insurance? There are fees and there are insurance costs. At least in my state, insurance costs are set on the amount of the property. And they are disclosed in the GFE and then more precisely in the HUD-1. Maybe the insurance is $900 and the fees and transfer costs are $1100 more? I'd call your title company and/or broker/lender.

By the time you go to the table, you should know where every signle penny is going on your statement.

With that said, title transfer is expensive. Here in PA, it was 4% just in transfer TAX. Lump sum that gets paid to city/state that is gone foreever. Title fees / insurance were $2000 in my case, or somewhere thereabouts.

I think I brought $16,500 to the table, and only $2500 of it went down as a down payment. Every other dollar went towards fees, tax, MI, and buydown amount.

Give your title company a call. And ask for them to account for every cost line by line. Make them work for their money. Title companies are a gravy train. The least they can do is put you at ease that you aren't getting ripped off.

Dag, JQ. Now I'm starting to worry. I'm hoping to buy a house in the 135K to 150K range and I was figuring on having 9-10K by August. I was thinking downpayment of 3% and then again that for other fees. I guess I'll need to save up more. I wonder if my daddy wants to give me a couple thousand .

[jq26]

Just for you Mag I pulled out my settlement sheet. These are actual costs on a home of $195k in Philadelphia:

Title Insurance: $1350,

Title fees: $280,

Transfer tax: $7800 (1/2 paid by buyer = $3900)

Recording fees (more tax): $325

1.5% upfront MI (required with FHA): $2860,

1 year of prop insurance: $1360,

1 year of tax: $1300,

Conveyance fee: $150,

Tax service fee: $77

Notary Fee: $25

Loan origination fee: $1910

Loan discount fee: $967

Appraisal fee: $500 (more because there are three units)

Doc Review & Underwriting fee: $500

Prepaid Interest: $135

All of this went bye-bye at closing. Never to be seen again. This does not include any down payment. Quite honestly, I think I could have shaved a few of these fees down by threatening to go elsewhere but I was a rookie and really didn't know better. Next time I'll not only question every one on line by line items, but I'll ask for it to be waived or that party stands to be replaced. Even my realtor tried to hit me up with a $500 fee that her office charges all BUYERS. I told her that I will breach my contract with the seller before I pay her that fee (she waived it so that I'd go to closing so she'll get her commission).

This doesn't even mention the post-closing surprise fees that have to be paid. In Philly, ALL customers regardless of credit now have to make deposits for utilities due tothe deadbeat rate being skyhigh. That was $450 to gas company, and $150 to electric company. Water company doesn't make you put forth a deposit. Plus, I had a home inspection ($500), termite inspection ($50) and flood certification fee ($5?) to pay for that were not on the settlement sheet.

And since it is a rental, I had to pay $250 to Philadelphia tax bureau for a business license, and then $90 annually for the privilege of landlording. And pay a gross receipts tax every year that makes you pay despite not making a dime.

This is why I say buying real estate is expensive. The transactional costs are real. When selling, you don't pay most of this stuff but you do get whacked with roughly 6% in commission, 2% transfer tax, and other small fees (U&O cert.). That's over 8% that evaporates on the way out.

I negotiated the seller down from original ask of 239,000 to 195,000 with a $8000 seller's assist for a net price of $187k (though the title says $195). This helped make the pain of closing costs a little easier to handle.

Beware that Philadelphia is about to reassess every property in the entire city, so not only will your income be subject to 4% city income tax but they will be taking a whack at your property every year at FMV. I'm not sure if you said you were looking in Philadelphia or not, but just in case!

[Magdalen77]

Thanks, JQ. It's good to know what I'm in for. I just need to squirrel away every penny and like you say question every fee.

We're not going to be house-hunting in Philadelphia County, but in Montgomery County which already has ridiculous tax assessments. Just looking around I've found out that your typical 150K house has taxes of close to 3K. The only ones that don't are the ones that it's been a long time since assessment. They seem pretty good at re-assessing around here, so if I got a house that was much lower, I suspect it wouldn't be that way for long. I've also found out from my insurance agent that a typical policy on a 50-100 year old house in my town would cost around $600/year. I aksed him why that would be slightly cheaper than my car insurance. A $2500 car vs. a $150,000 house and he told me that average payout time for a car policy is once/three years and the average for a house policy is once/eleven years.

[firstsource]

It seems like homes are starting to sell again nationwide. Hard to tell what is happening in your area. If they are starting to sell there this is the time of the year and housing cycle to make crazy offers.

Have your Realtor make an offer for 8% in seller paid closing costs and Down Payment assisstance. If the seller accepts, great, if not keep saving your money.

Charles

[Magdalen77]

It seems like homes are starting to sell again nationwide. Hard to tell what is happening in your area. If they are starting to sell there this is the time of the year and housing cycle to make crazy offers.

Have your Realtor make an offer for 8% in seller paid closing costs and Down Payment assisstance. If the seller accepts, great, if not keep saving your money.

Charles

Good thoughts, but I still have this crappy repo on two of my credit reports. It won't be out of SOL until late this year. You think someone would finance me and make all those concessions with my current scores and that repo? Any other derogs I have are old and paid or settled or small and paid in full (payment on parking tickets).

[Magdalen77]

Yippee!! I hit a 1,000 posts. Boy, do I not have a life.

[Houdino]

Congrats on 1,001 Mag. Do you think your Daddy would give me a couple grand too?

Good specific info in this thread. I'm house hunting for first time too.

[Magdalen77]

Congrats on 1,001 Mag. Do you think your Daddy would give me a couple grand too?

Good specific info in this thread. I'm house hunting for first time too.

Probably, he won't give $$$ to you, but I'm his number 1 daughter.

This thread is helping get realistic goals. If I have to wait another 9 months while I save mo' money, I will. I don't think I could stand the disappointment of finding my dream house and then discovering I didn't have enough cash in hand to get it.

[jq26]

Sorry to threadjack (again), but what aggravates me is that on the HUD-1 there is a sizable "yield spread premium" listed and the broker I went through is a guy that I've known for years. As soon as I saw it, I immediately called him and read him the riot act. He told me that almost all of that isn't legitimate and he only gets a small piece of it. He told me that the ysp listed gets jacked up in FHA loans because of some sort of accounting they use. I took him at face value. Is this not true?

[ctfudge&bankofC-ville]

What are you guys even talking about when you say "typical $150K house"? In this area of Maryland, the single family houses are $350K on up. More typically over $400K for the "starter" models. Townhouses in the 200s if you do not want a basement. (Meaning two-level condo.) Nice townhouses just as pricey as the single houses. Condos in the 200s for the more basic 2-bedroom 2-bath variety.

[Magdalen77]

What are you guys even talking about when you say "typical $150K house"? In this area of Maryland, the single family houses are $350K on up. More typically over $400K for the "starter" models. Townhouses in the 200s if you do not want a basement. (Meaning two-level condo.) Nice townhouses just as pricey as the single houses. Condos in the 200s for the more basic 2-bedroom 2-bath variety.

I live in an older, inner (and very unfashionable with yuppies) suburb of Philly. Average price of a single family home around here is about $180K, but that average includes the nearby townships that are much more fashionable where a single family house is more like 250-275K. So here in the hood a single family home is more like 150-175K for a decent place and 100-125K for a fixer-upper. You can occasionally find decent homes in the low 100K range, but they are mostly fixer-uppers or in, well, much less desirable parts of town.

The Philly area is and has been pretty reasonable vis-a-vis housing prices. Though we're starting to see the effects of the slowdown. Houses that I was looking at that were listed at 175-200K last summer and fall are down to 140-175K.

[robynhgl]

Update:

Signed my mortgage papers on Friday afternoon. The realtors 'ate' the title insurance that I was having a problem with. It turned out to be a reimbursement for the Fannie Mae Title Insurance (The house was a foreclosure and owned by FM) that FM had paid. I looked at my Purchase Agreement and it said NOTHING about that. The realtors may have discussed it but it was never brought to me. I was told that the $900 from the concessions would have to be used to pay the Title Company for the insurance and other costs...

I only had to pay $2060. at closing. My mortgage is for $178,000 @ 6.25%. So I'm pretty happy. (I put down a couple thousand for my GF deposit and that was used toward costs. I also prepaid my appraisal, inspections and homeowner's insurance so they weren't included in my closing costs.)

I spent the day working on the house...the previous owners must have had some sort of cleanliness phobia. Didn't realize just how dirty the place was until I was scrubbing cabinets and walls. But I love the house and it's going to be really nice when it's all cleaned up and painted.

Thanks for all the input, I really appreciated it. Sometimes people who are experts can make a person like me fell like we don't know what we're doing so they can do whatever they want. It's great to have a place that I can clarify things and get a better understanding so I can make the right decisions.

[Magdalen77]

Update:

Signed my mortgage papers on Friday afternoon. The realtors 'ate' the title insurance that I was having a problem with. It turned out to be a reimbursement for the Fannie Mae Title Insurance (The house was a foreclosure and owned by FM) that FM had paid. I looked at my Purchase Agreement and it said NOTHING about that. The realtors may have discussed it but it was never brought to me. I was told that the $900 from the concessions would have to be used to pay the Title Company for the insurance and other costs...

I only had to pay $2060. at closing. My mortgage is for $178,000 @ 6.25%. So I'm pretty happy. (I put down a couple thousand for my GF deposit and that was used toward costs. I also prepaid my appraisal, inspections and homeowner's insurance so they weren't included in my closing costs.)

I spent the day working on the house...the previous owners must have had some sort of cleanliness phobia. Didn't realize just how dirty the place was until I was scrubbing cabinets and walls. But I love the house and it's going to be really nice when it's all cleaned up and painted.

Thanks for all the input, I really appreciated it. Sometimes people who are experts can make a person like me fell like we don't know what we're doing so they can do whatever they want. It's great to have a place that I can clarify things and get a better understanding so I can make the right decisions.

Yup, knowledge is good.

Congratulations and happy cleaning!!!

[LVMortgageMom]

Sorry to threadjack (again), but what aggravates me is that on the HUD-1 there is a sizable "yield spread premium" listed and the broker I went through is a guy that I've known for years. As soon as I saw it, I immediately called him and read him the riot act. He told me that almost all of that isn't legitimate and he only gets a small piece of it. He told me that the ysp listed gets jacked up in FHA loans because of some sort of accounting they use. I took him at face value. Is this not true?

I've closed a ton of FHA loans, mostly as a banker, but some as a broker and I've never heard anything like that. Your friend may not have gotten a big chunk of what was paid, but i would bet that your title company cut a check in that exact amount to his company. The title/escrow company is there to keep everyone honest. There is corruption out there amongst them, but if everything else on there is accurate, I would venture to say that number is as well. Call them up and find out how much was paid to broker and if you can get a copy of the check to prove they were indeed paid.

[jq26]

Congrats to the OP. Sounds like you got a great deal!!!

Call them up and find out how much was paid to broker and if you can get a copy of the check to prove they were indeed paid.

No need. Quite honestly, I had a hunch he was blowing smoke to get a payday and what is done is done. He screwed up the closing and we ended up having a dry settlement anyway which was really irritating. I will never use him again. One of the resident CIC'ers will get my next deal.

[Ahntara]

"...yield spread premium...he only gets a small piece of it..."

Most brokers feel uncomfortable discussing their fee. THIS is generally how they get paid. It's what they work for. YSP typically raises a borrowers interest rates. An alternative to paying this on the backend, and every month thereafter in a higher interest rate/payment, is to pay the broker up front. You can 'buy down' the rate, which is essentially paying the broker instead of the lender paying him/her. This can add to down payment, reserves, up-front money and many consumers are not aware of this contingency.

Remember, everyone deserves to get paid for the work they do. Mortgage brokerages are not charity endeavors. All of the ones I've encountered are for-profit businesses.

[jq26]

I paid a point on the front of the loan. I also paid another 1/2 point to "buydown". In addition, I know the guy and explained that this was a long term rental property and that I know he needs to get paid somehow, but please charge me upfront (I have no problem cutting him a check for whatever- he has 4 kids) and get me to par rate. In response, he whacks me with $5600 ysp. Unacceptable.

My point is, the guy is a fool. He got a few bucks out of me but I plan on buying one rental property per year going forward. He knew this and figured he'd rather cash out on deal 1. Now he gets 0 business from me and people I know. In addition, my future job will put me in a situation to refer clients to him. He crushed any prospect of referrals in order to get one measley payday.