Purchase closing cost and what is the risk of not closing? (insurance, loan)

[rockdale]

Hi, All:

We are first time home buyer and have a few questions and thanks for any answers/opinions.

House price $600K, down payment $280K. Credit score 740+, Debt to Income Ratio is 22% ((Mortgage + Property Tax + House Insurance)/Income). The house is a new build and will be complete at the end of July. We need to provide a commitment letter before April 1st, then the Mortgage contingency is removed - meaning if we can not close for whatever reason, we lose our deposit (5% which is 30K). We talked to a lender who has an in house underwriter, (we specific asked this question after reading posts on this forum, they do not send the loan out to some 3rd party for approval, it is all in house)

And he said that our loan is approved as long as the following conditions have been met:
1. Satisfactory Residential Appraisal Report with all appraisal conditions met
2. Signed Purchase & Sales Agreement
3. Homeowner’s Insurance Binder to be issued within 3 days of closing
4. Satisfactory title search and title insurance binder
5. Paystubs and assets to be updated within 30 days of closing
6. No material changes in credit, income, nor assets prior to closing
7. Final Appraisal evidencing satisfactory completion of the home

Are those look normal? Once we signed the P&S, He can generate a conditional commitment letter(all commitment letters are conditional?) now. And as long as the financial picture does not change, we should not have problem to close. If we all sure we won't lose job between April and July, Is there any factors that we won't get closed for other reasons? Or are there too many factors that we can not control and it is too risky to submit the commitment letter so early?(to lose our $30K deposit).

Been a first time buyer, we do not know if there are any pitfalls that waiting for us. Is it 100% sure that as long as our financial picture does not change, we will have no problem to close? Since there are so many horrible stories on the web, not sure if we are missing anything here or we are just been paranoid.

This is the only thing that hold us from signing the P&S now. But wanted to make sure that we are making the right move.

Also, here is the estimated cost from the lender:

Appraisal – 400.00 (prior to work being complete)
Appraisal Review – 200.00 (once the Certificate of Occupancy is issued)
Processing- 400.00 to lender
Underwriting – 700.00 to lender
Legal fees – 1400.00 (including negotiation of P&S, title search, title commitment, closing)
Lender’s Title Insurance 800.00
Recording of deed and mortgage – 200.00
TOTAL $4100.00


Optional – owner’s title insurance $1400.00.

Is it within the ballpark, and what is owner's title insurance and do we need it?

Thanks a lot.
-Rockdale

[jackmichigan]

I won't attempt to answer your questions--I'll leave that to others--but I will ask a question of you. Who will hold your $30,000 deposit? I trust it will be an escrow agent and not the builder. Of all of the horror stories out there, perhaps the most glaring are those involving new construction where the house wasn't finished and the purchasers were out their deposit money, with little hope of recovery from the builder. Especially in this market, builders run into financial trouble, go out of buisiness, go bankrupt, or even skip town. This may not be common, but it happens more often than anyone would like to imagine. Whatever you decide to do, make sure that your money is safe pending a closing. If a builder claims that he doesn't have the financing to complete a house without your deposit, then maybe the builder shouldn't be in business.

One final note: who pays for title insurance should be negotiable. Practices vary across the country but, in Michigan, it is customary for Seller's to pay for title insurance.

[rockdale]

The deposit is in the list agent's escrow account. The builder has good reputation. He basically teared down old houses to build new one - we have no more un-developed land here. Last year he built two - all sold at the asking price. This year he builds just one - and he does not worry about there is no buyer - that's a reason why it is so difficult to work with