Prepaid finance charges at closing - CONFUSED

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Services for Real Estate Pros with no company

I am a first time home buyer  and we just received our Good Faith estimate and I am so confused. We have asked our agent/finance person about closing cost. It seems they go up every week. However on the estimate it states estimate of closing cost is in the $2K range, then below it says "prepaid finance charges" they are listed at $7K. I am reading online that these are paid at closing. No one has mentioned these cost to me or that we have to pay them. Can anyone help me and shed some light on this?

 

Thanks!

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Rainmaker
238,110
Angelia Garcia
Pure Realtors - Dallas, TX

What did your loan officer say?

Jul 11, 2008 10:37 PM #1
Rainer
798
lisa wolff
no company - North Reading, MA

we havent heard back from her since she is on vacation and I am nervous as we have never received ANY information on this. Also my agent is on vacation. I mean an extra $7K is alot to come up with, espeically without any warning. Also this is a VA Loan if that matters at all.

Jul 11, 2008 10:42 PM #2
Ambassador
823,435
Russ Ravary
Keller Williams Commerce - Commerce, MI
Metro Detroit homes - Michigan Real estate & Mortg

If they costs on the loan are too high and keep going up don't sign on the loan. 

Jul 11, 2008 10:51 PM #3
Rainer
44,250
Joe Virnig
RE/MAX Gold Coast REALTORS, Ventura County, California - Ventura, CA
No Ordinary Joe

It sound like things haven't been explained well.  You didn't mention your purchase price but $2,000 seems quite low and $7,000 seems quite high.  In CA, anyway, the lenders estimated cost for 3rd party charges are often off quite a bit.

Jul 11, 2008 11:01 PM #4
Rainer
16,961
Ginger Walker
Keller Williams Realty - Stafford, VA
Realtor e-PRO,CSP

Keep in mind that they gave you an estimate, and only an estimate.  Best of luck!

Jul 11, 2008 11:08 PM #5
Rainer
798
lisa wolff
no company - North Reading, MA

Sorry - pruchase price is $266,500 - a few things are waived due to this being a VA loan - on the good faith estimate is states " estimated closing cost - $2153"  then underneath that are some other charges:

Estimated prepaid reserves - $1426

Estimated Settlement charges - $3579

Estimated - prepaid finace charges - $7225

I am just not clear on these charges and I am trying to figure out what to expect. I am not ready to back out just yet I would rather be more educated first.

Jul 11, 2008 11:09 PM #6
Ambassador
317,959
Kirk Westervelt
Van West Realty - Greenville, SC Realtor -Short Sale Expert! - Greenville, SC
Kirk Westervelt, Broker In Charge, Van West Realty - CDPE - Short Sale Agent - Home for Sale - Greenville, Simpsonvil...

Hi, welcome to Active Rain! I hope to see more of your blogs in the future. Learn from others, share your knowledge and experiences and enjoy yourself! Take care! ---Kirk.

Jul 12, 2008 12:02 AM #7
Rainer
36,058
Libby Cousins
Extraordinary Processing - Spokane, WA
Contract Mortgage Processor

Lisa, I will try to help clarify things a bit but it is still difficult without seeing the GFE and you should speak with your loan officer. The pre-paid reserves are for your hazard insurance and taxes and that amount depends on when your taxes and hazard premium are due. That also may include the upfront payment of your first years hazard insurance. Those are solid items that you would have to pay even if you owned the home free and clear. The estimated settlement charges are all of the fees for the loan (the lender's fees, broker's fee if you are using one, the title and escrow fees, etc.).  Those are basically the cost of doing the loan. The pre-paid finance charges are simply all of the fees that are included in the calculation of the Annual Percentage Rate (APR) and that will show on your Truth-in-Lending (TIL) disclosure. In other words, because those fees are "rolled" into the loan, it effects your actualinterest rate. Included in that total is the VA funding fee (which is a large portion of that figure).  You won't actually bring all of that money to closing, most of it will be included in your loan amount.

The figure that you want to look at for the amount that you need to bring to closing should be worded at the very bottom as something like "total est. funds needed to close". Please be aware that this figure will most likely change MANY times throughout the loan process but should be close to what it was on your original GFE if you have a good loan officer/broker. Sometimes things change drastically though and the borrower does have to come in with quite a bit more money than they anticipate. Each loan is different.

I hope this has helped and not confused you more!  Please contact your loan officer when she gets back from vacation. Remember, all of the figures are just ESTIMATES at this time. I commend you on your thought process of seeking out education rather than panicing and canceling the loan. You seem to be very level-headed.

Libby

Jul 12, 2008 02:11 AM #8
Rainer
51,056
Holly Lynch
Keller Williams Greenville Central - Travelers Rest, SC

Lisa, It is confusing..even for agents sometimes. We typically tell our folks to count on at least 3% of the purchase price set aside for closing costs. If the seller pays for some it could be less and on the rare occasion it could be more. But that is a good round amount to count on no matter what type of loan it is. Because it is VA are you doing a 100% or at least putting down some $$ It all adds up. The biggest thing is to get together with your husband and estimate your TYPICAL monthly bills INCLUDING the estimated mortgage/tax/insurance IE: utilities, gas groceries. If the mortgage is more than 1/4 of your take home pay then bottom line..you've got more home than you can afford.

Good luck and welcome

Jul 12, 2008 07:00 AM #9
Rainer
64,747
Crystal Corr
Keller Williams Greenville Central - Simpsonville, SC

Welcome to Active Rain. I Hope you will enjoy it and learn from it as much as I do. Look forward to more of your bloggs.

Good luck with your home and the closing cost. I hope all works out for you.

Jul 12, 2008 08:46 AM #10
Anonymous
Jonathan Hammmon

Item 1 that is the amount that has to be in your escrow acount so that when the taxes and insurance come due there is enough to pay them.  This amount looks ok.  but find out when your taxes and Home owners insurnace premium is actual due.  Also take the total tax amount yearly and the insurance and divide each amount by 12 that is the amount that will be added to your P & I payment to be made each month.

Item 2 this is the amount that the tile company is require to insure chain of tile is clear and fees to actual close the loan and fund (if the tile company is doing that) some one has to so find out who if the title co is not.  thes numbers are pretty high.

Item 3 these are outrageous.  If you are not buying down your rate (ie trying to get a rate more in line with that of the major banks) then the LO is charging at least 2 origination points.  Remember that a point be it discount or origination is 1% of the loan.  Also keep in mind that  he/she is going to get a premium when they sell this loan to a servicer (eg. countywide, bank of america gmac etc) and will probably get between 3 -4 more points.

this loan in my opinion is bordering on Preditory lending triggers.  Remember that if the total of fees is more that 8% of the loan amount get another Loan Officer.  Also DO NOT BE PRESSURED TAKE YOUR TIME NOT THEIRS YOU NEVER HAVE TO SIGN A LOAN DOCUMENT.  I don't want to advacate walking out at closing as- as a fellow Loan Officer I would not like it- but you do have that right.

Good luck

May 15, 2009 07:05 PM #11
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