Colin Moody

Understanding Closing Costs

There are certain standard costs associated with closing on the purchase of a new home. These costs are typically divided up between the buyer and the seller as spelled out in the sales contract. We will assist you in negotiating these terms working diligently to not only get the sales price you want, but also to limit the amount of these closing costs for which you will be responsible. We will also work closely with your mortgage professional to make sure the terms of the sales contract, and the costs you will pay, fit in with your specific financial goals and objectives and the mortgage plan you have chosen.

Once your Mortgage Consultant has discussed with you the appropriate mortgage plan and strategy to buy your new home, they will provide you with a written estimate of the costs you will likely incur, and an estimate of the total amount of cash you will need to buy your new home. Keep in mind, this is an estimate. Prior to your closing date, the attorney responsible for the closing of your home will prepare the final "HUD1 Settlement Statement" which will itemize the exact costs that you will incur at closing.

The Good Faith Estimate

By law, lenders are required to provide you with the Good Faith Estimate of Closing Costs within 3 days after formal loan application. The estimate is based on certain known standard fees and costs as well as the Mortgage Consultant's past experience. The estimate will likely not include all costs because it is virtually impossible to know every single expense associated with the purchase. Each property and circumstance is unique. A skilled mortgage consultant, however, should be able to provide a reasonable estimate that is pretty close to the actual final total.

It is important to understand the nature of closing costs so that you can make an informed comparison as you shop around with various lenders. Costs on the Good Faith Estimate are broken down into 3 general areas as follows:

When you add these three categories together, you have the total amount of costs related to buying the new home with a new mortgage. The problem for most borrowers with comparing costs between lenders is they focus solely on the total, bottom line cost number. This is not the appropriate comparison to make, however, and the problem has to do with the nature of the details of Good Faith Estimates.

Of the three categories of costs, Lender Fees, Vendor Related Fees, and Prepaid Expenses/Escrows, only Lender Fees will potentially vary in amount between each lender. The other two categories, Vendor Related Fees, and Prepaid Expenses/Escrows will ultimately be the exact same cost at closing even though each lender will likely estimate the numbers differently. It is also easy to manipulate these numbers, so it is important that you work with a mortgage professional who will provide you with reasonable numbers--even perhaps an estimate that is "padded" a little bit so you don't have a bad surprise at closing.

So, how do you truly compare cost estimates and loan programs between lenders? It's easily confused but actually fairly simple.

You simply make sure that you compare only the Lender Specific Fees for each lender along with the basic interest rate for the same program and loan product for the same "lock period". The lock period is the time between the day your interest rate has been locked in and guaranteed up to and including at least the day of your closing or beyond. Other factors are important of course. Rates and Fees are only some.

What Information will be needed for the Loan application.

Social Security Number, for borrower and co-borrower if any

Employment History
For the last two years, employment dates, addresses, salary.
Current pay stubs or W-2 forms.

Check and Savings Accounts and Certificates of Deposit
Location of bank accounts, account numbers and balances;
Address of bank if out of town
Last 3 months' statements

Stocks, Bonds, and Investment Accounts
Broker's name and address, description of stocks, bonds, etc.
Last 3 months' statements or copies of stock certificates

Life Insurance Policies
Insurance company, policy number, face amount, cash value, if any

Retirement Plan
Approximate vested interest value
Copy of latest statement

Liabilities and Other Non-Mortgage Debt
Creditors names, addresses, account numbers
Monthly payments and balances

If you're self-employed
Two years tax returns, profit and loss statements, both company and personal if separate.
Current balance sheet and profit and loss statement if more than two months into the new fiscal year, signed by CPA.

If you have income from:

Commission
Overtime
Bonus
Partnership
Rental Property
Trust
Notes Receivable
Interest/Dividends
You'll need two years' personal federal tax returns

If employed in family business

Personal federal income tax returns and all schedules for the past two years

If divorced or separated

Complete executed divorce decree and settlement agreement
Payment history of alimony/child support over the past 12 months, if it is a financial obligation.
If you choose to have this be considered as part of your income (you don't have to), be prepared to provide 12 months canceled checks or bank statements reflecting income deposits.

Name and address of all mortgage lenders for the past 24 months, account numbers, monthly payments and balances

If you've sold your home but not closed:

A copy of the sales contract

If you've sold your home, closed, and you will use the proceeds for your new down payment:

A copy of the HUD-1 Uniform Settlement Statement

Name, address and phone number of landlords for the past 24 months

Purchase sales contract or offer to purchase and all addenda
Furnish contract fully executed by buyer and seller

If a source of your down payment is a gift:

Name, address and relationship of donor.
Gift funds will be verified in both the donor and recipient's accounts.
Note: Not all loan programs allow gifts to be part of your down payment.

For FHA Financing

Evidence of Social Security Number and photo identification

For VA Financing

DD214 and Certificate of Eligibility (COE may be ordered online by us)

For Construction/Perm Loan

Signed construction with cost breakdown, builder plan and specifications

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The first thing to understand about mold is that there it's everywhere - indoors and outdoors. It's in the air and can be found on plants, foods, dry leaves, and other organic materials.

It's common to find molds in homes and buildings as molds grow naturally indoors and can enter a home through heating and air conditioning systems, doorways and windows. Mold spores also enter the home on pets, your clothing, shoes, bags and people.

When mold spores locate excessive moisture in your home, they will grow. Problem sites include humidifiers, leaky roofs and pipes, overflowing sinks, bath tubs and plant pots, steam from cooking, wet clothes drying indoors, dryers exhausting indoors, or where there has been flooding.

Materials chosen to build homes can provide suitable nutrients for mold, helping it to grow. Examples include paper and paper products, cardboard, ceiling tiles, wood, and wood products, dust, paints, wallpaper, insulation materials, drywall, carpet, fabric, and upholstery.

Exposure to mold

For some people, a small exposure to mold spores can trigger an asthma attack or lead to other health problems. For others, symptoms may only occur when exposure levels are much higher.

Should I be concerned about mold in my home?

Yes. If indoor mold is extensive, those in your home can be exposed to very high and persistent airborne mold spores. It is possible to become sensitized to these mold spores and develop allergies or other health concerns, even if one is not normally sensitive to mold.

Left unchecked, mold growth can cause structural damage to your home as well as permanent damage to furnishings and carpet.

According to the Centers for Disease Control*, "It is not necessary, however, to determine what type of mold you may have. All molds should be treated the same with respect to potential health risks and removal."

Can my home be tested for mold?

Yes. An indoor air sample can be taken as well as an outdoor sample to determine whether the number of spores inside your home is significantly higher. If the indoor level is higher, it could mean that mold is growing inside your home. Reliable air sampling can be expensive, time consuming, and requires special equipment and a qualified technician.

If you can see or smell mold, then you should take steps to clean-up the mold. Mold growth is likely to continue unless the source of moisture is removed and the contamination is cleaned-up.