John Reinhardt
REALTOR
770.475.1130 Ext. 6806
ESTIMATED COSTS OF CLOSING
Closing costs may vary from one lender to another and from one loan program and another. Your lender should present you with a "Good Faith Estimate" of your closing costs. Depending on the time of the month you close, this should be close to your actual costs at closing. If you do not understand the costs, it is your right and your responsibility to ask your lender to explain.
In Georgia, the SELLER typically pays :
1. Transfer tax on the deed at a current rate of .0010% of the selling price.
2. Real Estate Commission to Listing Broker (typically split with Selling Broker)
3. Any back property taxes, liens, overdue homeowner's association fees,
costs to correct any title problems (see Purchase and Sale Agreement for how this
is handled).
Note: As of January 1, 2007, the Seller is no longer required to provide or pay for a prelisting termite letter, nor provide a clear termite letter at closing unless all parties agree in writing. However, I recommend that the seller have a termite inspection prior to listing, and treat, repair or disclose any problems.
Closing costs may be paid by the Seller or the Buyer. If the loan is less than 90% Loan to Value, the lender may only allow the Seller to pay up to 3% in closing costs, discount points, and any other cost of closing combined. FHA loans and 90% LTV (Loan to Value) typically allow a 6% seller contribution. WHO PAYS THE CLOSING COSTS IS NEGOTIABLE AT THE TIME OF CONTRACT.
Items Which Are Considered Closing Costs
LOAN ORIGINATION FEE . Mortgage Loan Only. This is essentially the "commission" charged by your originating mortgage company or bank. Remember, your originating company probably is not funding the loan, so its fees are collected only one time, at the time of closing. The average loan origination fee is 1% of the loan amount.
APPRAISAL. Mortgage Loan Only. Optional for Cash Sale. About $350.00.
FLOOD CERTIFICATION . Mortgage Loan Only. This doesn't mean that your property is in a flood plain - it is required by all title companies. Average of $90.00.
TITLE SEARCH . Mortgage Loan Only. Optional for Cash Sales. About $150.00.
LENDER'S TITLE INSURANCE . Mortgage Loan Only. This is a mandatory closing cost. It protects the lender's interest in the property against any claims against the title. Cost varies - $200.00 and up.
OWNER'S TITLE INSURANCE. Mortgage Loan or Cash Sale. This is optional in Georgia. It protects the Buyer/Owner against any future claims against title. It is a one-time fee. Cost varies. The title company typically issues the lender and owner's policies at the same time, and offers a discount at that time. Multiply the purchase price by .002, and you'll get an estimate of the cost.
FINAL PROPERTY SURVEY. This probably will be optional for Mortgage Loan, and is optional for Cash Sales. Most title companies no longer require a survey at closing, but the lender may require it (or the buyer may want one). The cost averages $275.00-$300.00. You may request that the closing attorney order the survey for closing, or you may order and pay for it prior to closing.
TERMITE LETTER (GEORGIA WOOD INFESTATION REPORT). As of January 1, 2007, the Georgia Association of REALTORS "Purchase and Sale Agreement" does not require the seller to provide a "clear termite letter" to the buyer. The burden is on the buyer to order the inspection within the inspection contingency deadline, and present the seller with any requests for treatment or repairs. For most mortgages, this is now optional.
TRANSFER TAX ON THE MORTGAGE. Mortgage Loan Only. Cost depends on the mortgage.
ATTORNEY'S FEE. Mortgage Loan or Cash Sale. This is the fee to the Closing Attorney who represents the lender in the transaction. The average fee in Atlanta is $400-$550.
Depending on your lender, there may be other costs for mortgage broker commissions, underwriting fees, courier fees, etc., that would be considered closing costs.
Please refer to your lender's Good Faith Estimate for specific costs, and don't hesitate to ask your loan officer for further explanations if necessary. You'll also want to be sure to bring your Good Faith Estimate to closing with you, to compare it to the Settlement Statement.
Prepaid Items
Prepaids are not to be confused with Closing Costs. Closing Costs are costs to close the loan, such as lender and attorney fees and title insurance. Prepaids are items which are prorated or escrowed at closing. These may include the following:
PROPERTY TAXES
1. The current year's tax bill will be prorated at closing. If the tax bill is not yet out, the attorney will estimate the bill and will prorate the buyer's and seller's shares at closing.
2. An escrow account will be set up with your lender to pay your tax bills in the future. Your lender generally will require enough months in escrow at closing to pay the next tax bill when it comes due. However, if the tax bill is not yet paid for the calendar year, the buyer will be credited with the seller's share of the tax bill. Be sure to get together with your lender prior to closing and clarify how much will be required for escrow.
HAZARD INSURANCE
You must bring a one year paid policy to the closing for your homeowner's insurance (or have it sent by your insurance company to the closing attorney for the premium to be deducted at closing). Your lender will require at least two month's of your insurance premium to be escrowed at closing for next year's bill.
HOMEOWNER'S ASSOCIATION FEE
If your neighborhood has a homeowner's association with a mandatory fee, the fee will be prorated at closing, depending on how your HOA collects (monthly, quarterly or annually). You may also have to pay in full an initiation fee.
PMI - PRIVATE MORTGAGE INSURANCE
If your loan is less than 80% loan to value, your lender may charge PMI, or Private Mortgage Insurance. You will pay a percentage at closing, and a percentage will be added to your monthly mortgage payment. Your lender should include an estimate of this cost in your Good Faith Estimate.
The current Georgia Association of Realtors contract allows either the Buyer or the Seller to pay prepaids, but this may dictated by the lender and loan program.
Recommended Optional Items
ONE YEAR HOME WARRANTY. This is not considered a true closing cost, but may be paid at closing by the buyer or seller. Several third party companies offer home warranties for resale homes. The cost for basic coverage is under $400.00, and certain optional coverage may be added. Your agent can recommend several excellent companies in metro Atlanta.
HOME INSPECTION. This is not a closing cost, and is optional. The cost of an independent home inspection is the Buyer's cost. If you are buying with the right to have the home inspected, it is your responsibility to order the inspection within the deadline period and pay the inspector at the time of inspection. This is for defects that may not be easily discovered in a visual inspection.
RADON INSPECTION. If you are purchasing a home in north Georgia, it is advised that you have an indepent radon test performed during your inspection contingency.
FINAL PROPERTY SURVEY showing the property boundaries, where the house and driveway are placed on the property, and any easements or encroachments. Some lenders require a survey at closing, but most do not. If you do not include a recent survey in your owner's title policy at closing, your title insurance may exclude any property line disputes!
OFFICIAL GEORGIA WOOD INFESTATION REPORT (Termite Inspection). If the seller does not have a current termite bond, it is advised that the buyer have an inspection as part of the inspection contingency, and request for the seller to treat and repair any active infestation.
OWNER'S TITLE INSURANCE. The mandatory policy issued at closing is the Lender's Title Insurance. In Georgia, title insurance is optional for buyers. If there is a cloud on your title, or a claim against your title, during your ownership or when you sell, you'll want your own policy. Just like hospitlization insurance, you may never need it. If you do need it, you could lose up to your entire equity without that policy.
John Reinhardt
REALTOR
770.475.1130 Ext. 6806
John Reinhardt
REALTOR
770.475.1130 Ext. 6806
Documents Needed for Loan Application
1. Check or cash for Credit Report and Appraisal Fees. Approximately $350.00 total.
2. Names, addresses, phone numbers and dates worked for each employer for the past two years. Most recent pay stub. W-2s for the past two years.
3. A copy of your present driver's license and Social Security card.
4. Names, addresses, account numbers and balances of all bank accounts you currently have open.
5. A copy of your previous three months' bank statements on each open account (all pages of statement).
6. Debts (credit cards and loans): Names, account numbers, addresses, balances, and monthly payments. Include accounts with zero balances and student loans.
7. Current or recent mortgage holders, if any, with names, addresses, and account numbers. Note: this includes any equity loans you may have.
8. Value of life insurance policies and the amount of their net value.
9. Approximate value of personal property, such as furniture, appliances, jewelry, expensive camera equipment, etc.
10. Make, year and value of vehicles.
11. Copy of the Purchase Agreement on the home you are buying.
Special Circumstances
The following additional information may be required at loan application:
Self employed persons will need to supply the previous two year's tax returns, signed and with all attachments, and a signed Year to Date Profit and Loss Statement prepared by an accountant. If you are incorporated, please bring two years' complete corporate tax returns.
Applicants with rental property will be asked to supply information on lenders and copies of rental or lease agreements.
If present home is pending sale or sold, a copy of sales contract and/or HUD 1 (Settlement Statement).
If you are applying for a VA loan, bring your Certificate of Eligibility and discharge papers (DD214).
John Reinhardt
REALTOR
770.475.1130 Ext. 6806
John Reinhardt
REALTOR
770.475.1130 Ext. 6806
Credit Scoring - Advice From the Experts All lenders use credit scoring for conforming loans, and your credit score will affect the type of loan and the terms available to you, although there may well be other underwriting requirements in addition to the FICO scores. Because the three reporting agencies report differently and may update at different times, your score may vary from one agency to another. Typically, the lender will use your middle score. If you are unsure of your credit rating, it would be a good idea to order a copy of your credit report in advance of applying for a loan. This will enable you to correct any mistakes or pay off any old debts and have your credit report updated. All credit reported remains on the report for SEVEN YEARS from the last date of activity, except for bankruptcies which are on the report for ten years. The last activity is any change reported on your account, including your last charge, your last payment, or the date you paid off your balance. You'll find a variety of offers for purchasing an online credit report, including your credit scores at MyFICO.Com. You can also obtain a free credit report from each of the reporting agencies by writing to them directly.
EQUIFAX TRANS UNION EXPERIAN/TRW
P. O. Box 740256
Atlanta, GA 30374-0256
800-675-1111
Fax: 888-978-0146
ecis@equifax.com
P. O. Box 2000
Chester, PA 19022
800-916-8800 or 800-267-1440
Fax: 610-541-4286
P. O. Box 9595
Allen, TX 75013
800-567-5470
800-879-3752
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Here are some tips for maintaining a healthy FICO score: 1. Always make payments on time. Delinquent accounts in the most recent 24 months have the most weight on your scores. 2. Avoid inquiries (loan shopping). Excessive inquiries may diminish your credit rating. 3. Avoid store accounts, including 90 day "same as cash" offers, as most stores sell their accounts to finance companies, and this will not look as favorable as a bank credit card or loan. 4. Avoid balances of more than 10% of your available credit line on your cards. Note: It is not a good idea to consolidate all of your debt on one card. A lower balance and longstanding good payment history on several cards is better than one larger balance. 5. Legal actions such as judgments (court decisions), collections (a delinquent account which has been turned over to a collection agency), and bankruptcies harm credit ratings. 6. Check your credit reports regularly for accuracy. If you find a mistake, be sure to dispute it in writing and check to make sure it has been corrected. 7. If you pay off an old debt, be sure to get a commitment from the creditor that your date of activity will not be changed at the time of the pay off (otherwise, it may remain on your credit for seven years from the time of payoff). NOTE: Paying off a delinquent account will not remove this bad credit from your report. It will remain for seven years from the date 8. If you decide to pay off and close an account, be sure that it has been reported that the account was closed at the consumer's request. |
John Reinhardt
REALTOR
Solid Source Realty
770.475.1130 Ext. 6806
John Reinhadt
REALTOR
770.475.1130 Ext. 6806
Lenders
Before you begin your home search it is a good idea to be pre-qualified by a reputable mortgage lender. Most Sellers expect the Buyer to be prequalified prior to making an offer to purchase a home. A very rough guideline is that your house payment, including taxes and insurance, plus your other fixed debts, such as credit card payments, car payments, child support, student loans, etc., should equal no more than 36% of your combined gross income.
Pre-qualification is not loan approval. It is based on an in file credit report and the information you share with the lender about your employment history, income, and debts. Loan approval requires further documentation and verification.
If you find a mortgage company whose rates seem "too good to be true," expect some surprises in the form of discount points, junk fees, or a loan program that is not available when you get ready to close. Be aware that the lender cannot lock in your interest rate without a Purchase and Sale Agreement.
John Reinhardt
Solid Source Realty
REALTOR
770.475.1130 Ext. 6806
John Reinhardt
REALTOR
770.475.1130 Ext. 6806
The Fixed Rate Loan
A fixed rate loan is a loan in which the interest rate remains the same throughout the life of a loan. Fixed rate loans usually are available for terms of 15 or 30 years.
The Adjustable Rate Loan
An adjustable rate loan is a loan in which the interest rate can adjust during the life of the loan. The adjustable rate mortgage (A.R.M.) can be designed to adjust as often as every year or may not adjust for 3-10 years. All adjustable rate loans have an annual cap, which means they cannot adjust more than that each year, and a life cap, which means they cannot adjust more than for the life of the loan. Some adjustable rate loans have a conversion clause allowing you to convert to a fixed rate loan at the time of the first adjustment.
Interest Only Loans
Interest Only Loans typically are adjustable every 3 or 6 months and the most common are tied to the LIBOR index (London). There are two benefits to this loan: a low monthly payment, and the ability to pre-pay principal at an time. If you have an existing home to sell, and particularly if you are transferring from another city, this might offer a way for you to qualify for two mortgage payments until you sell your home. Making regular payments of principal will enable you to build equity much faster than with a 30 year amortized loan.
The danger in this loan is in not making principal payments during the term of the loan. You could end up with a big balloon payment at the end of the term. Be sure to discuss this and any other loan programs in detail with your loan officer.
Discount Points
Discount points may be paid by the Buyer at closing or may be included in the price of the home and paid by the Seller up to the allowable seller contribution. One discount point equals one percent of your loan amount. For example, one discount point on a $150,000 loan would be $1,500. You may lower your interest rate by paying discount points. Your particular loan program will dictate how much the Seller may pay toward discount points and closing costs.
Because discount points are considered prepaid interest, the amount you pay in discount points is tax deductible.
FHA Loans are available in many programs similar to Conventional loans. Your Loan Officer can recommend a program that might best work for you.
Although the interest rate usually is 1/4 percent higher than conventional loans, the IMP (Mortgage Insurance Premium) is lower. FHA also allows a higher debt ratio. In Gwinnett County the FHA loan limit is $165,000.
One type of FHA you may hear about is the Nehemiah Loan. This program allows first time home buyers with excellent credit and verifiable income to get into a home with very little money out of pocket. The Seller is required to pay the 3% down payment, the 3% closing costs, and a 1% fee to the Nehemiah Foundation. Although it may be agreeable to Buyer and Seller to increase the selling price to accommodate this program, unless the property is initially underpriced, it may not appraise for an increased amount. This can become an unsurmountable obstacle just before closing.
VA Loans are available to qualified veterans who have VA entitlement. For qualified veterans the benefit is the ability to obtain a 100% loan at a rate slightly higher than conventional. Higher debt rations are allowed. For first time users, the VA Funding Fee is 2.25% of the loan amount, usually rolled into the loan amount. There is no mortgage insurance premium.
You may be approved for a second VA loan. If your original loan is not paid off at closing (sold as a "loan assumption") the loan value would be deducted from your eligibility. For the second time user, the VA Funding Fee is 3.3% of the loan amount.
If you are going VA, be sure to order your CERTIFICATE OF ELIGIBILITY from VA well in advance. You may do this online, as well as get other questions answered, at this Veteran's Administration web site:
http://www.homeloans.va.gov/lgyfaq.htm
John Reinhardt
Solid Source Realty
770.475.1130 Ext 6806
Serving Metro Atlanta & Suburbs. Solid Source Realty, InFrontMarketing.com - John J. Reinhardt - 770.475.1130 Ext. 6806
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