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1. FHA tax service fee $70 (my real estate agent has never heard of it)
.......exactly what is this, and since it's a FHA fee it's on the buyer?
2. Flood life of loan fee $19
......small fee but what is meant by this? Is this normally a seller or buyer fee?
3. Title Insurance $98.67
........I went to a lawyer who once did a title search for me, and asked about his fees to handle a house buying-closing. His clerk gave me the numbers and she mentioned that the lawyer handles the title insurance for the company that actually sells it, so the lawyer would get a portion of the fee. I heard it is "x" dollars per $1000 of loan? Would you know it's cost?
.......The lawyer fee includes a title search and if there were issues with the title that might affect the contract between the buyer and seller this search would discover it. The buyer wants "no surprises". Since there will be a title search to make sure it is clean and clear, why the need for title insurance? My agent said that some buyer's, if paying cash, bypass the title insurance. If the title search by the lawyer is going to protect the buyer from some title issue, why is the insurance needed?
4. Title Insurance Binder $75
........what is this?
Tax service fee is the fee that is charged to monitor taxes are paid. For FHA loans this fee can be paid by anyone EXCEPT the borrower, so the seller or lender usually end up paying for it.
Flood life of loan, or flood certificate, is something that is ordered to determine if you are in a flood zone or not.
Title insurance cost is normally based on state regulations, it'll vary depending on your state. Off the top of my head I'm not certain what it is for York County, SC. Title insurance is needed for the lender. If you are paying cash, then it's up to you if you want it or not. Sometimes title searches aren't completely thorough/don't catch everything, for $98.67 it's worth the peace of mind IMO.
Title binder is a temporary insurance policy covering the property until the issuance of a permanent title.
Tax service fee is the fee that is charged to monitor taxes are paid. For FHA loans this fee can be paid by anyone EXCEPT the borrower, so the seller or lender usually end up paying for it.
Flood life of loan, or flood certificate, is something that is ordered to determine if you are in a flood zone or not.
Title insurance cost is normally based on state regulations, it'll vary depending on your state. Off the top of my head I'm not certain what it is for York County, SC. Title insurance is needed for the lender. If you are paying cash, then it's up to you if you want it or not. Sometimes title searches aren't completely thorough/don't catch everything, for $98.67 it's worth the peace of mind IMO.
Title binder is a temporary insurance policy covering the property until the issuance of a permanent title.
ok, thanks.
Your answers are always detailed and pleasant. There are a few in these real estate related forms who can't say anything nice, ever.
I did find out a couple things before your answer arrived.
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The title insurance binder was estimated by the lender at $75. However, the two lawyers who have been seen the most times by my agent at closings, etc. they both charge $100. She usually refers her buyers to those lawyers and other agents use them too.
Is this a buyer cost?
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On title insurance it is $2.50 per $1000 of loan. My loan is just under $39,500.
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That tax service fee looked questionable to me. I'll make sure my agent knows that is a seller or lender fee usually.
What do I make of my lender suggesting that if my closing cost are $3300, that I offer the seller our agreed upon price + $3500 and ask the seller to pay $3500 of my closing cost....?....when in fact the most a seller can pay on an FHA loan is 6% = $2368 on a loan of $39,468....?....
Is that 6% a voluntary "incentive" they can offer, and in my case it is just a way for me to finance most of my cost?
You are welcome, I've been answering people's mortgage questions over the internet for many years, and I know what "netiquette" is, so I usually come across as very professional... although I do not like wearing suits or ties; I'm more of a shorts, sandals & t-shirt kind of guy.
Title insurance binder is negotiable, but typically on the closing statements I've seen it's listed as a buyer cost.
Your lender may be confused on the amount the seller can pay, although I would hate to think that is the case since it's been 6% for a very, very long time (may drop down to 3% sometime this summer though). The 6% is also something that is negotiable, it doesn't always have to be offered by the seller... it's only if you and the seller agree to it. If you don't need the help, then don't ask for it, because in theory if the seller isn't giving you the 6% credit towards closing costs then they would've accepted a sales price that is 6% less.
I may have stated it wrong. On both my FHA loans, last year (but the sale never occurred) and now, I was able to let my closing cost be part of my loan.
So, in my current case, the seller would not be "giving me" anything. I'd be "over paying" them (agreed sale price 40,000 + $3500) by $3500 and then ask them pay $3500 toward my closing cost, thus most of my closing cost are part of my mortgage.
(**) So, maybe a seller offering to reduce the price by offering a buyer 3% toward their cost/incentives, is where the 6% FHA limit comes into play.......
and/or
(****) my lender suggesting that I pay my seller $3500 more than the sale price, so the seller can pay most my closing cost with that $3500 (which is my money since it will be loaned to me as part of my mortgage above and beyond the cost of the house) may not be subjected to that 6% FHA limit? If the FHA will "see" that I gave the seller an extra $3500 and the seller gave it to my lender to cover $3500 of my cost, then it may be the same thing as (**) above.
It's a way to let a buyer finance most of the closing cost. Maybe FHA is cracking down on that.
If, in either of the above cases (**) and (****) the limit is 6%, then with my loan being $39,500, $3500 won't work like the loan officer said, as 6% is under $2400.
We are on the same page... but realize the closing costs are never part of an FHA loan, they are just paid by another party other than the buyer. The sales price might be upped in trade for the seller paying the cosing costs, but that is not the same as being included in the FHA loan amount.
The sales price might be upped in trade for the seller paying the cosing costs, but that is not the same as being included in the FHA loan amount.
So does the above bring into play the FHA 6% limit on seller paying toward cost?
This particular house, owned by Fannie Mae was offering 3.5% toward seller cost/incentives if closed by June 30th etc. but that is gone now. Was that 3.5% going to be part of the HomePath loan, or was the seller just going to reduce the price by 3.5%?
Well, if I can not borrow the closing cost, I'm not clear on giving the seller, out of my pocket, an extra $3500 only for them to hand it back to the lender. It was my understanding that it would be part of the loan.
Especially on my FHA loan last year when my agent said it is a way to reduce my upfront cost.
At that time, the sale price was $45,000. The bank on an FHA loan was going to loan me $47,500 and I was to offer the seller $47,500.
Then ask the seller to pay $2500 toward my closing cost. Thus my loan was the sale price and most of my cost to buy.
This implies, on my current loan, if the seller is asking $40,000, I just offer $43,500 so "that number" becomes the loan amount and eveything is fine with FHA?
Am I understanding it right?
If the extra given to the seller is not part of my loan, no need for me to give it to them, I just hand it to the bank myself. These real estate agents and lenders say it is a way to finance your closing cost. And I've heard it many times from many local people, so there could be FHA violations. If the house I want is $40,000, then my FHA can be a dollar higher than that?
Most people just tell you "loan will include your closing costs" because they don't want to take the time to explain it to you or how it works. You've been working with lazy people because that is how you seem to understand it. Nothing wrong with you, it's just the people around you. A $40k loan amount isn't huge by any means, most people won't put much effort into doing things the right way unfortunately.
HUD has a $100 down program (for buying HUD repo homes), but they don't have a $0 down program, so I believe you are mistaken on the figures of your prior transaction. Again, it was probably just not explained clearly enough to you. If you believe it was, go back to that same loan officer and ask if they can give you a $40,000 FHA loan on a $40,000 sales price... I'm sure you'll be surprised by their answer, or maybe you won't if they are as haphazard about explaining things as last time. Either way, I am giving you the straight poop, Chet, Victor, SmartMoney and others can verify I'm sure.
If the sales price is $43,500 and you are required to put down a 3.5% down payment, this would then equal a base loan amount of $41,977.50 (probably rounded down to $41,900 or $41,977, but let's use $41,977.50 for this math). The difference of $1,522.50 becomes your down payment amount. That money has to be paid by you or on your behalf from an eligible source (gift funds, down payment assistance from the city/county/state in form of a grant or a 2nd mortgage, etc.... but NOT the seller, or the real estate agents, or the lender, or the closing attorney). Let's just say your closing costs are $3,300 including insurance premium, reserves for your escrow account, underwriting/tax/flood fees, title fees, closing attorney fees... basically everything. Let's also say the seller agreed to pay 6% of the sales price ($43,500) towards your closing costs, which would be $2,610, remember it can't be more than 6% (the 6% doesn't include prorated tax credits though, so you can get 6% + prorated tax credits). You would have to come in with the difference between $3,300 & the $2,610, or $690, plus your down payment of $1,522.50, totaling $2,212.50.
So looking at those numbers, you wouldn't want to offer $43,500 because that is $3,500 more than the $40,000 that the home is listed for/seller had said they want. You would probably want to offer $42,600 or right around there. Remember 6% seller credit is based on the sales price, so on a $42,600 sales price it translates to a max seller credit of $2,556. Assuming closing costs are still $3,300, you would then have to come in with the $744 difference, plus the 3.5% down payment on $42,600, which is $1,491... totaling $2,235.
I don't believe anyone is violating FHA, they wouldn't be that dumb (well some people will, but it's virtually impossible to get an underwriter on board), it just hasn't been explained clearly enough to you how the numbers work out.
Most people just tell you "loan will include your closing costs" because they don't want to take the time to explain it to you or how it works. You've been working with lazy people because that is how you seem to understand it. Nothing wrong with you, it's just the people around you. A $40k loan amount isn't huge by any means, most people won't put much effort into doing things the right way unfortunately.
HUD has a $100 down program (for buying HUD repo homes), but they don't have a $0 down program, so I believe you are mistaken on the figures of your prior transaction. Again, it was probably just not explained clearly enough to you. If you believe it was, go back to that same loan officer and ask if they can give you a $40,000 FHA loan on a $40,000 sales price... I'm sure you'll be surprised by their answer, or maybe you won't if they are as haphazard about explaining things as last time. Either way, I am giving you the straight poop, Chet, Victor, SmartMoney and others can verify I'm sure.
If the sales price is $43,500 and you are required to put down a 3.5% down payment, this would then equal a base loan amount of $41,977.50 (probably rounded down to $41,900 or $41,977, but let's use $41,977.50 for this math). The difference of $1,522.50 becomes your down payment amount. That money has to be paid by you or on your behalf from an eligible source (gift funds, down payment assistance from the city/county/state in form of a grant or a 2nd mortgage, etc.... but NOT the seller, or the real estate agents, or the lender, or the closing attorney). Let's just say your closing costs are $3,300 including insurance premium, reserves for your escrow account, underwriting/tax/flood fees, title fees, closing attorney fees... basically everything. Let's also say the seller agreed to pay 6% of the sales price ($43,500) towards your closing costs, which would be $2,610, remember it can't be more than 6% (the 6% doesn't include prorated tax credits though, so you can get 6% + prorated tax credits). You would have to come in with the difference between $3,300 & the $2,610, or $690, plus your down payment of $1,522.50, totaling $2,212.50.
So looking at those numbers, you wouldn't want to offer $43,500 because that is $3,500 more than the $40,000 that the home is listed for/seller had said they want. You would probably want to offer $42,600 or right around there. Remember 6% seller credit is based on the sales price, so on a $42,600 sales price it translates to a max seller credit of $2,556. Assuming closing costs are still $3,300, you would then have to come in with the $744 difference, plus the 3.5% down payment on $42,600, which is $1,491... totaling $2,235.
I don't believe anyone is violating FHA, they wouldn't be that dumb (well some people will, but it's virtually impossible to get an underwriter on board), it just hasn't been explained clearly enough to you how the numbers work out.
minor confusion setting in....."minor"
The house I'm looking at now, they are asking $40,000. They were offering 3.5% toward cost/incentives. That may be off the table.
So, when I am talking to my loan officer and my agent and the seller, I should state it this way: You are asking $40,000 for the house. I'll offer you $42,500. Then you agree to pay up to $2500 of my closing cost.
Right?
My loan officer took the $40,000 and subtracted my down payment of 3.5% to get $38,600. Then he added the MI.
That = $39468 = the loan amount on which he did all the calculations of fees.
AFTER giving me the fee list and all the numbers on this $39,468 loan, THEN he said, "some of these cost don't apply so lets assume your cost are $3300. Just GIVE your seller $3500 extra and ask them to pay up to that amount toward your fees."
So, he meant to say, OFFER your seller $42,968 ($39,468 + $3500).......but with the limit of 6%, we'll have to change that to:
OFFER your seller $41,968 and ask them to pay up to $2500 toward your closing cost.
This would make my loan amount more than $39,468.....to the tune of $2500 more.
So, when I am talking to my loan officer and my agent and the seller, I should state it this way: You are asking $40,000 for the house. I'll offer you $42,500. Then you agree to pay up to $2500 of my closing cost.
Right?
You got it!
Quote:
So, he meant to say, OFFER your seller $42,968 ($39,468 + $3500).......but with the limit of 6%, we'll have to change that to:
OFFER your seller $41,968 and ask them to pay up to $2500 toward your closing cost.
This would make my loan amount more than $39,468.....to the tune of $2500 more.
Correct, you aren't directly financing them... but in an indirect way you are.
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minor confusion setting in....."minor"
