What Fees should I expect, and what should I watch out for?
The U.S. Dept. of Housing and Urban Development created and put into law the Real Estate Settlement and Procedures Act (RESPA). The purpose of the RESPA law is to protect American Home Owners and buyers from fraud in the process of acquiring real estate with a home loan in addition to offering the consumer a consistent platform from which to compare different lenders proposals.
The act has a number of specific issues it covers, but one of the most important of them is the use of the Good Faith Estimate and Truth In Lending. Specifically, these documents are to be provided to you within 3 business days after applying for a home loan. This applies to any type of home loan when it regards a Primary Residence... you should demand these documents if you have applied for a loan! The GFE/TIL is your documentary back-up to offers made by your loan officer. Ambient Home Lending makes every effort to deliver these documents to you on the day you apply rather than waiting the 3 days allowed under the rule.
Ambient Home Lending believes in the process of Up-Front Pricing. This is a nationally recognized process which is becoming much more popular as home ownership becomes more common and borrowers become more informed. Up-Front Pricing means that we will issue you a Good Faith Estimate of fees at the time you apply with us and you can count on that fee structure to be intact throughout the loan and there will be no changes to take you by surprise at closing!
Obviously, if there is a material change to the program, qualifying or your application status, changes to fee may be necessary. The law requires the lender to disclose changes to the borrower, in writing, within 3 business days from the change. Ambient Home Lending makes every effort to be in touch with the borrower at the time the change is made to see if any other choices can be made which may off-set that change. In every circumstance, we assure you that we make every effort to keep you informed so that you are never surprised at closing.
Origination fee; To Pay, or Not to Pay... That is the question!
Many lenders try to entice borrowers to their shop by constantly using the buzz-word "NO-FEE"! Does that really mean that you, the borrower pays no fees on your loan... don't count on it! What it does mean is that you are definitely not getting the best rate available were you to accept an average Origination Fee from the Lender.
OK, so what is an average Origination/loan fee? Based on the average purchase loan scenario (10-20% down, good credit/work history and no special loan conditions or terms and a loan amount of $125,000 or more) you shouldn't pay more than 1% as an Origination fee.
Is there a reason to do a NO-FEE Loan?
Absolutely! There may be a multitude of reasons you may choose a no fee loan of which we will list just ONE: Reduction of "out of pocket" cash at closing! Just make sure that you don't get the double wammy of the classic No Fee scenario, which is you pay a higher rate and pay the "buy-down" discount fee.
What are POINTS? In today's market, points are used properly and improperly.
The proper use of Points are the legitimate buying down of rate to achieve a rate lower than the market recognized floor rate of the day, or to off-set fees associated with special conditions of your loan. Special conditions can include: investment property loans, special qualifying like Stated Income or No Doc qualifying. Other conditions apply which points may be assigned to your loan, just make sure that they are backed up by a real and logical explanation!
The improper use of points are the illusion of the "NO-FEE" loan where on line 801 of the Good Faith Estimate (known as the Origination Fee line) there is no fee listed, but on line 802 (known as the Discount Points line) there is a charge of 1-3 percent which is justified by a statement of "rate buy-down" or some other cryptic statement. Many of the major lender web-sites use this to create an illusion of no origination fee. Don't be deceived in this way... that lender is using that "buy-down" as their fee! The way to tell whether this tactic is being used is to call 3 or 4 other local lenders and ask for their "floor" rate. If their floor rate is the same as your "bought-down" rate, you may want to start looking elsewhere!
H.U.D. requires your GFE/TIL to include lender fees and conditions as well as any other fee you may expect to pay in the processing of your loan. After the lender fees, you can expect to pay Title and Escrow fees, Appraisal, Underwriting and Courier/delivery fees. These fees are only estimates and may change slightly as they are from outside services and cannot be guaranteed by your lender.
You also will be required to fund a reserve account for Taxes and Insurance in most cases, but these are not fees associated with the loan. Reserve accounts are only associated with First Trust Deeds and not Second Trust Deeds such as Home Equity Lines of Credit.
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