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Old 06-20-2010, 09:06 AM
 
706 posts, read 1,044,340 times
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Arrow What exactly will seller paid "closing costs" cover and will I get cash in my pocket for the difference if there is any

Last year I had a $47,500 FHA mortgage. The seller was asking $45,000 and my closing cost were around $2,500. The way it was set up with the lender, I'd offer the seller, $47,500 and he'd give me $2,500 toward my closing cost. The sale never occurred.

Now, I have an FHA mortgage of $40,000 with 3.5% down = loan amount of $38,600. So, this loan is about 11% lower.

loan amount approval was the $38,600 + $868 = $39,468 with the $868 being the FHA upfront MIP.

A 11% lower loan but the total approximate cost of prepaid interest and escrows and closing fees is $5085.00 and in another place on the form it says approximate total funds needed to close of $5,618.00.

Waaaaay higher than last years $45,000 loan.

Can someone explain to me how these numbers add up and what my cost should be?

List if closing fees:
origination charge 488 (this is the lender fee and set in stone for sure)
credit report 14 (this is a real charge because I've paid it before)
appraisal 495 (this is a sure expense as well though the house is owned by Fannie Mae and they have already had it appraised or they could not be asking $40,000)
tax service fee FHA 70 (sounds indisputable)
flood life of loan fee 19 (flood meaning what?)

abstract or title search 175 (I got a lawyer who can do this for 150)
title insurance binder 75
lawyer document preparation fee 75
lawyer fees 550
title insuance 98.00
closing/escrow/settlement 50
deed recording fee 10 (it sure is in my county)
recording fee - mortgage/dot 20
city/county deed stamps 44 (I have a house for sell and this should be a seller cost?)
state deed stamps 104 (seller pays?)

inspection fees:
survey 500
pest inspection 110
structural engineer inspection 575
roof inspection 175

FHA upfront MIP 868

total: 4516.00

If the loan includes the 868 MIP will it be backed out of my cost?

The lender said all fees from the title search down to roof inspection were all estimates.

title search and deed recording are definites. I think deed stamps are usually seller fees. My real estate agent may be able to refer me to a lawyer who she works with regularly and he can do it all, and the lender said, fine, I could use their lawyer or any lawyer.

My agent also has an inspector who charges 350 and he's there 3-4 hours and test for pest, soil quality, water, power loads on the panel, roof, the whole works. The lender said the survey fee and the structural engineer fee were probably 0.

I'm pretty good at math but with never having bought a house, I am not very clear on what my closing cost will be.

The totals above, with a few of them being estimates, is 4516.00
Then prepaid interest and escrow reserves:
interest 15 days at 5/day = 75 (what 15 day period?)
real estate tax escrow and insurance escrow 179
1st year insurance premium 350
aggregate adjustment (-36) (Yippee, finally a negative number)
total 569
+ closing estimates of 4516 = 5085

Then in another area of the page approximate total cost needed to close:
purchase price 40,000
earnest money 0 (first zero on the sheet!!)
less total loan amount of 39468 = 532
estimated closing cost 4516
approximate prepaids and reserves 569

The lender took the 4516 estimated closing cost and tried to eliminate such things as the survey, structural engineer, maybe one lawyer doing all the legal stuff and estimated closing fees at $3300.
She said, if you are going to offer $40,000 for the house, just offer $43,900 and ask the seller to pay $3900 of your closing cost. Sounds easy. If my closing fees are under $3900, and I do offer them $43,900 and ask for $3900 back will I get it all or will the difference go back to the lender?

Can anyone look over the numbers and make heads or tails out of it and really zero in on my estimated and expected closing cost? When this lender was $2000-$2500 higher but with a 11% lower loan than last year, I wondered why my buyer cost are so high this time.

Thanks.
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Old 06-20-2010, 09:33 AM
 
Location: MID ATLANTIC
3,748 posts, read 7,479,392 times
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Do you need a structural inspection? Unless you have doubts, this is not a typical fee. Survey is not required if the title insurance policy won't require it.

The fees seem in line, your earnest money deposit would be credited towards the total money you need at closing. But to answer your question, no, you are not allowed to pocket a dime. Some lenders will let you be reimbursed for the appraisal fee, but not when paid by credit card. You will need evidence you paid it and from your funds to get it back (same with the other inspections). We typically document with the borrower's cancelled check and a bank print out.

You need to decide what your objective is here: Do you want to make sure you don't pay a dime at the closing table, or, do you want to make sure you use all of the seller's money, even if that means you must bring additional funds to the down payment to the closing? No one is going to hit it dead on, so decide now and inform your loan officer.
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Old 06-20-2010, 10:09 AM
 
706 posts, read 1,044,340 times
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Quote:
Originally Posted by SmartMoney View Post
Do you need a structural inspection? Unless you have doubts, this is not a typical fee. Survey is not required if the title insurance policy won't require it.

The fees seem in line, your earnest money deposit would be credited towards the total money you need at closing. But to answer your question, no, you are not allowed to pocket a dime. Some lenders will let you be reimbursed for the appraisal fee, but not when paid by credit card. You will need evidence you paid it and from your funds to get it back (same with the other inspections). We typically document with the borrower's cancelled check and a bank print out.

You need to decide what your objective is here: Do you want to make sure you don't pay a dime at the closing table, or, do you want to make sure you use all of the seller's money, even if that means you must bring additional funds to the down payment to the closing? No one is going to hit it dead on, so decide now and inform your loan officer.
I don't think a structural engineer is needed. The house has already been appraised, etc. by Fannie Mae and deemed worth the sale price. I had an FHA appraiser look at another house for me and he basically did a visual inspection and made notes. I guess Fannie's appraiser noted any structural defects and I don't think there are any.

I'll ask about the appraisal. I have a house for sale and my agent told me the lender will send out an appraiser and they are not working for the buyer or the seller, but rather the lender. And this is how an appraiser can spoil a deal between buyer and seller, the appraisal comes in too low.

Am I able to, as the buyer, choose an appraiser for this purchase?

I'll use checks on all expenses.

I want as much of my closing cost to be a part of the loan (or be paid by the seller) as I can.
My loan officer estimated actual closing cost of $3300. Then he wrote down $3900 and said just offer the seller the price of the house + the $3900 (my error it was actually $3500 he stated, but he wrote $3900)
and ask for them to pay $3900 toward your closing cost.
If the $3900 is too much, where does the excess go, back to the lender?
You see, this mortgage should be paid off in 1 to 1.5 years, so I'm trying to get by with as little out of pocket cost as I can.

I think I can provide the above list of legal fees and inspection fees to my agent and she can refer me to a lawyer and an inspector. Once I get those cost approximated more closely, I can add in the cost I know are not estimates but facts.

I guess my goal would be sale price $40,000, closing cost $3100 (or other number) and I offer the seller $40,000 + $2900 = $42,900 and ask them to pay $2900 toward my closing cost. Thus $2900 of my closing cost are in the loan amount, and my out of pocket is $200, plus the down payment of 3.5%.
$40,000 - $1400 down = $38,600 + $868 FHA fee + $2900 to seller to pay toward my closing cost = $42,368 actual loan amount.
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Old 06-20-2010, 10:38 AM
 
Location: MID ATLANTIC
3,748 posts, read 7,479,392 times
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I need to amend my answer to:

I didn't see anything out of line with the numbers you were given, except the seller cannot pay that much of your closing costs. I suspect the reason why it's felt the appraiser is a deal wrecker is because you are adding almost 10% to the sales price. The seller can only pay 6% towards your closing costs ($2700 on a $45,000 sales price).

And no, you can not pick the appraiser. His intent is not to kill the deal, but to make sure the property is adequate collateral for the loan. Period. You should not be there when he is there, in fact, you should not even talk to him. There are new regulations on the books and that could be considered interferring. No one should be contacting the appraiser, except the bank employee ordering the appraisal.
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Old 06-20-2010, 11:26 AM
 
706 posts, read 1,044,340 times
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Quote:
Originally Posted by SmartMoney View Post
I need to amend my answer to:

I didn't see anything out of line with the numbers you were given, except the seller cannot pay that much of your closing costs. I suspect the reason why it's felt the appraiser is a deal wrecker is because you are adding almost 10% to the sales price. The seller can only pay 6% towards your closing costs ($2700 on a $45,000 sales price).

And no, you can not pick the appraiser. His intent is not to kill the deal, but to make sure the property is adequate collateral for the loan. Period. You should not be there when he is there, in fact, you should not even talk to him. There are new regulations on the books and that could be considered interferring. No one should be contacting the appraiser, except the bank employee ordering the appraisal.
Why is the seller limited to 6%?
The sale price is $40,000 so 6% would be $2400. My lender, very clearly told me if your closing cost are X then add X (and in his example, the amount added was more than X) to the offer price and ask seller to pay that X toward your cost. I'll have to clarify what he told me.

On a house I have for sale the commission is 6%, then deed stamps, lawyer, and maybe some buyer cost asked for. I was told a seller can expect selling cost as high as 10% or more. oooooooo, these would all come "out of or off" my asking price.

I remember the loan last year, the loan agent said, "even I don't know the name of the appraiser that would be assigned to your mortgage". They might know after the fact.

My agent told me I can indeed be there for the inspection.
I'm banned from showings of my other house for sale, so I can see why appraisers would do their thing alone.
But, you never know what they will do. Last year an FHA appraiser said he would let a 6 foot vertical crack in the brick on the back side of a house go as "cosmetic". The crack was wide enough for your little finger. Then he made a fuss over the chimney flashing but the gaping crack was "cosmetic" I couldn't count on enough luck to have him be the appraisor on that house on my mortgage, so I abandoned my interest in that house.

And as my agent suggest, an appraiser who comes out in the morning may appraise a house for X dollars and another one comes out in the afternoon and appraises it more or less than X.
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Old 06-20-2010, 12:57 PM
 
Location: Laguna Niguel, CA
768 posts, read 2,577,114 times
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It's an FHA guideline that seller isn't permitted to pay more than 6% of the sales price towards buyers costs. If the seller credit is more than your costs, the difference goes back to the seller (not lender).
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Old 06-20-2010, 01:21 PM
 
706 posts, read 1,044,340 times
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Quote:
Originally Posted by ShanetheMortgageMan View Post
It's an FHA guideline that seller isn't permitted to pay more than 6% of the sales price towards buyers costs. If the seller credit is more than your costs, the difference goes back to the seller (not lender).
ok, thanks, I'll try to zero in on my total cost and make sure the extra to the seller is a few hundred below actual and within the 6%.
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Old 06-20-2010, 03:37 PM
 
Location: MID ATLANTIC
3,748 posts, read 7,479,392 times
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There is a huge difference between an inspection and an appraisal. And no, you are not entitled to be present at the appraisal.
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Old 06-20-2010, 04:22 PM
 
9,793 posts, read 10,223,282 times
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Quote:
Originally Posted by SmartMoney View Post
There is a huge difference between an inspection and an appraisal. And no, you are not entitled to be present at the appraisal.
I understand that you are not be entitled to be there at the appraisal but it is really true that you can't be there for it? We had the house we are buying inspected on the same day that the appraiser was there. We never talked to him, he was just doing his thing. We were busy with the inspectors.

We tried to arrange for as many things as possible on the same day. It's just easier that way. I don't see how our presence there mattered one bit. He walked around, did his thing, and left.
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Old 06-20-2010, 06:33 PM
 
Location: MID ATLANTIC
3,748 posts, read 7,479,392 times
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I never said he couldn't be there. However, there is a sense of entitlement many times, as the buyer pays for the service.

There's a new law on the books, called Home Valuation Code of Conduct, or HVCC. It was initially a Fannie Mae regulation, but most lenders and other agencies have adopted HVCC. From Fannie's website:

The Code states that members of the lender’s loan production staff who are compensated on a commission basis or who report to any officer of the lender not independent of the loan production staff and process are not permitted to order appraisals or influence the selection of appraisers. Ideally, a Seller should establish complete separation of appraisal activities from loan production activities. At an absolute minimum, the degree of separation should be no less than one level up in the reporting structure. To mitigate any potential conflict of interest due to reporting relationships, Sellers should establish, maintain, and enforce written policies and procedures that are designed to reinforce independence.

SELLER = WHOEVER IS SELLING THE LOAN TO FANNIE

In other words, not only are loan officers and their staff not able to order the appraisal, it's been interpreted we cannot even speak to the appraiser. There is no way for a buyer to know who is doing the appraisal and when. No one, other than the seller and or their agent to answer the appraiser's questions, should even speak to the appraiser. In today's environment, that could be construed as attempting to influence the outcome. (Even then, I tell my owners on refi's to get the hell out of there when the appraiser is present. You would be amazed how often they dig a hole for themselves). The last thing the appraiser needs or wants is a buyer bird-dogging them as they go through the home. That's what the home inspector is for.....follow him or her.

Your being present the same day is not a problem. It's when the chatty Kathy's get going and start pointing out things and asking about the marketability of the home because this or that. It's especially a problem if the home inspector starts yapping out loud what is wrong in the appraiser's presence. I've actually had an appraiser excuse himself from the job after a buyer tried to get the repairs placed on the appraisal (when the home inspection was done at the same time as the appraisal).
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