Informational Articles
Loan Process
Documentation
APR vs Interest rate
Good Faith Estimate
Closing Costs
Appraisals
Credit Scores
Interest Rate Intro
For Sale by Owner
Moving to Dallas
Selling your Home
Credit Questions
One of the most important documents for you to obtain from any lender and/or mortgage broker is the Good Faith Estimate of Settlement Charges.
This Good Faith Estimate (or GFE) provides an accurate estimate of all related closing costs associated with the proposed mortgage transaction. It is a requirement that all lenders provide you with a Good Faith Estimate of Settlement Charges (GFE)along with a Truth-in-Lending (TIL) within 3 days of taking your application.
The most important item to consider when reviewing the GFE and/or the TIL is how accurate is it? One of the many issues that have hurt the mortgage industy as a whole is the inconsistant and/or under estimation of closing costs listed on the GFE. There are far too many stories about customers who were initially given a GFE at the time of application only to find out at the closing table that those fees have been significantly increased. The closing table is too late to be finding out that your closing costs have increased and many people simply figure it is too late to do anything about it and have come to expect it. The fact is, it is not too late to do something about it at the closing table. You, as the customer, should bring in your initial GFE with you to your loan closing and compare the items on the HUD-1 Settlement Statement. During your comparison, you should be looking first at the "total fees" or "settlement charges" and comparing the two numbers. If the closing costs that you are actually paying on the HUD-1 are increased over the numbers on the GFE you have several options:
When our office provides you with a Good Faith Estimate those fees will NOT be increased. I have been in this business for over 15 years and I have found that the way to build long term relationships with our customers is to be totally upfront and honest about closing costs. When you go to the closing table I have already reviewed the HUD-1 and have made sure that the closing costs reflect what the initial GFE stated. One thing to keep in mind regarding this statement; If we need to change the program and/or lender because the you, the customer, has altered your initial request, then you will be issued a new GFE that will be reflective of any changes. Additionally, if initially you state that you have an appraisal and/or survey that meets the criteria for the loan program and it turns out that either the lender and/or the title company require either a new appraisal or survey then those costs would be adjustments to the initial GFE. In either case, I will either issue you a revised GFE or certainly advise you at the time of the change long before you get to the closing table. The bottom line is that we will NOT have any surprises at the closing table, if there are any changes along the way you will be the 2nd to know (as I will be the 1st to know).
Every company that is out there making mortgage loans are making them based on risk factors and are certainly in it for a profit. That being said, there are many ways to structure your loan which should be tailored to yoru specfic needs and circumstances.
Just about everybody can offer a low or no closing cost loan, however, all options need to be taken into consideration before you make your decision as to which way to proceed. The bottom line is that you WILL pay a higher rate for a low or no closing cost loan, the question is does it make sense for your situation? The length of time you intend to occupy or keep the subject property is a primary consideration. Basically, if you intend to keep the property long enough to recoup your closing costs, then you should get the best rate you can and pay the standard closing costs. If it is your intention to keep the property (such as your primary residence) for an extended period of time, such as you believe that this is the house you will keep and don't intend on moving again, then there is no question that you must take the lowest rate you can get with reasonable closing costs as you will easily recoup your closing costs and save money over the long run.
One particular item to look for, especially in Texas, is the cost of the title insurance listed on the GFE. Every lender and broker in Texas knows what title insurance costs in Texas (the highest in the nation) and, although it is sad, the reality is that most will underestimate the title insurance costs on the GFE to show lower closing costs and explain it to the customer when they are at the closing table that they had no conrtol over those costs. The fact is that while they do not have control over those costs, they could, and should, be more realistic when it comes to preparing your GFE so that you can actually compare GFEs from other companies and get a realistic price comparison.
Most lenders only require either a small fee and/or the appraisal fee as "out of pocket" costs. Some don't require any at all. We always require that our customers pay for their appraisal at the time of inspection and that is the only out of pocket costs for our customers. The remaining closing costs can be financed into your loan. The financing of closing costs does effet your APR (see the page APR for a complete explanation). It is obvious that it is less expensive to pay all of your closing costs in cash at the closing, however, it is not normally practical for the customer to pay those costs our of pocket and most end up financing them into the loan.
The State of Texas has some very unique and some restrictive lending laws when compared to all other states in the U.S.
While I personally agree with most of them, particularly when it comes to Home Equity Loans, these restrictions to effect what the consumer is able to borrow against their homestead property. Texas Home Equity loans, commonly referred to as Texas Cash Out loans, are particularly restrictive in the state of Texas. There are very specific laws in the state that make home equity lending in Texas more restrictive than in any other state.
While there are obvious benefits to the consumer, particularly when it comes to the 3% limitation on closing costs, the 80% of the appraised value can be somewhat disturbing to some consumers particularly those that have resided in other states that have no such limitations. Personally, I see most of the items as beneficial to the consumer, however, what has happened is that there are only a finite number of lenders that actually offer Texas Home Equity Loans because of the strict laws in place (please keep in mind that I have really only listed the basic highlights that benefit the consumer and not the entire list of requirements and documentation necessary to complete a Texas Home Equity loan which are more of the reasons that lenders chose not to do those types of loans). The bottom line is that if you are a customer that qualifies for a conforming Texas Cash Out Loan, then the above highlights certainly benefit you. If you happen to be in the sub-prime (credit issues) catagory you still benefit from some of the restrictions, however, the closing costs limitation of 3%, although it still applies, can be circumvented which translates to higher closing costs. Although these closing costs are circumvented in some cases, it is normally necessary in order to obtain a quality loan at a good interest rate. This is in no way meant to say that if you do not qualify for a conforming loan that you should not obtain a Home Equity loan, it simply means that the loans are simply structured differently.
One item that is extremely perplexing to both consumers and I is that the cost of title insurance is the highest in the U.S. - that is not to say we are amoung the highest, we are THE highest. As a sample, a $200,000.00 loan in California recently cost about $600.00 for title insurance, while a recent loan in Texas for $150,000.00 costs $1500.00 for title insurance. As you can see, the difference is quite signifcant and even wider in most other states. The fact is that there is no way to get around title insurance and you can be assured that this will take up a majority of your closing costs.
