THE GOOD FAITH ESTIMATE - Your Closings Costs Explained

Every mortgage has certain expenses associated with it. These expenses are normally disclosed to the borrower in a government required disclosure called the "Good Faith Estimate". This disclosure was designed to make the consumer aware of the costs associated with their mortgage. When shopping for your mortgage this disclosure also serves as a tool for comparing lenders and their product costs. This disclosure is not absolute nor is it perfect but it should give a borrower a very good idea of the costs and services that are necessary for their loan request.

The following listing would represent the normal closing costs for a 30 year fixed rate mortgage, with a loan amount of $200,000.00, at an interest rate of 6%, without escrows, no points for origination or discount, and no Broker Fee: Assume a Purchase Price of $250,000.00

Definitions:

Appraisal - The determination of the value of the property thru the comparison of similar homes that have sold within the last six months to a year that are within close proximity to the subject property as determined by a fee appraiser.

Credit Report - The compilation of one’s creditors and their reporting of their credit experiences with the borrower.

Tax Service Fee - This is a one time fee that hires an outside company to provide proof to the lender that your property taxes are paid every year.

Administrative Fee - This is a lender fee. It used to be referred to as document preparation and underwriting. It is used to offset the cost of booking your loan.

Flood Certification Fee - A third party is hired to determine if the property is located in a flood zone.

Mortgage Title Insurance Policy - An insurance policy that insures the lenders lien position. It includes a search of the public records on the history of the transference of the property and a search of the sellers name.

Recording Fee - The cost to record the new mortgage in the public records at the courthouse.

Documentary State Stamps - A state tax placed on every mortgage made in the state of Florida. It is calculated at the rate of 35 cents for every $100.00 borrowed.

Intangible Tax - Another state tax collected on every mortgage made in the state of Florida. It is calculated at the rate of 2 mills (0.002) times the mortgage amount.

Survey - A sketch that shows the property’s lot lines and if there is a building on the property its dimensions and its location within the lot lines. It also shows fences, porches, patios, pools, driveways, outbuildings, etc. It may reveal encroachments and easements.

Interest - This is normal interest on the loan. It is collected from the day of closing until the end of the month in which closing occurs. This varies on every loan as the closing date varies per the sales contract. We have chosen to show 15 days worth as an example, however, if closing happens at the beginning of the month more days interest will be collected and if closing occurs at the end of the month less days of interest are collected. Our estimate will always show a per day interest figure so that any number of days interest can be calculated.

Whenever the loan to value of the mortgage is 80% or less our lenders allow the borrower to pay his own taxes and insurances. It is not required to have the taxes and insurances included in the monthly payment. Some borrowers prefer to have the taxes and insurances included in their monthly payment and this can also be arranged. Please keep in mind that regardless of whether escrows for taxes and insurances are in place or not the lender will require that the first years premiums for homeowners and flood insurance, if applicable, are paid and in place prior to closing. They can be made effective for the day of closing but proof of payment and the review of the coverage amount needs to be done before any closing papers are drawn up.