First time home buyer seminar
What is a good faith estimate?
Unfortunately,
one of requirements of buying a home are “closing costs”. So what are
mortgage closing costs?
Closing costs are charges paid by the home buyer to process the loan
and record (register) the loan and sale with the state and county. The
real estate closing costs (fees) paid to the state or local government
are called deed transfer tax, recordation fees, and documentary tax
stamps.
Typical lender closing costs can include discount and/or origination
points, application fee, appraisal fee,
credit report fee, title search
and title insurance, survey fee, escrow account,
flood certification,
and per diem interest.
The mortgage lender will provide you with a good faith estimate of the
closing costs when you make loan application. The good faith estimate
will also include your down payment, mortgage amount, type of loan (i.e.
FHA,
VA,
USDA, or
Conventional).
Depending on the loan, the seller is permitted to pay a percentage of
the buyer’s closing costs.
Read more
After the financial crisis a few years ago, the Federal Government now
requires all banks, mortgage brokers, and mortgage bankers to provide
homebuyers with a “new” good faith estimate of settlement costs within
3 days of a completed loan application. The new closing cost estimate
is designed to bring conformity to the lending industry. All lenders
are required to issue the same new good faith estimate to applicants’,
regardless of whether they are located in California, Florida or any
other state. The “GFE” is the same. The new closing cost form makes
it much easier for the borrower to company loan offers.
This regulatory change requires lenders to become more accurate with
their good faith estimates. Fines and penalties may be imposed by the
Federal government if the lender substantially misinforms buyers of
the closing costs. Here is a great video produced by the Department
of Housing and Urban Development about the new good faith estimate and
closing costs.
The final step in buying a home is the closing (or settlement).
The closing or settlement is when the seller signs over the deed
to the homebuyer; and the buyer, mortgage company, or settlement officer
hands a check to the seller.
The buyer pays for the down payment, closing, and escrow costs at settlement.
The entire closing is regulated by the Federal and state government.
The HUD-1 is the statement of closing costs to the buyer and seller.
The following video explains the real estate settlement.