Month: October 2021

Buying a home with the help of a loan comes with other costs. The costs associated with financing a home should be part of your budget. These mortgage fees come under the umbrella of your closing costs and are typical of most loans. You can expect to pay 2% to 5% of your loan amount in closing costs.

There will be fees that you pay directly to the lender. The loan origination fee and any discount points to bring the interest rate down are usually percentages of the loan amount. The lender will also require a loan processing fee, an underwriting fee, a cost for document recordings and fees for any wired funds. Application and credit report fees are included as well. If your loan is an FHA loan, then you will be charged an up-front mortgage insurance premium.

Depending on what an individual state requires, there will be a fee for a lender’s title insurance policy, which insures any defects that may not have shown up in a title search and is also a cost to you. This may be in addition to the cost of a homeowner’s title insurance policy if the seller is not paying for it.

Third-party closing costs may include an appraisal fee, the cost of a survey, attorney fees and a charge for a title company representative to supervise the closing and title transfer.

At closing, there may be additional charges associated with prorations for property taxes, homeowners and mortgage insurance and HOA fees. The lender may also require you to deposit funds into a reserve or escrow account to cover upcoming taxes and insurance.

Call or email me to get an idea of exact costs in your area or for a specific price range, and let’s find the loan that works best for you.

Lending and underwriting guidelines set forth by Fannie Mae, Freddie Mac and FHA are what they consider acceptable qualifying factors for successful loan origination for lenders. These guidelines are based on historical profiles where loan repayments were made without default and those where repayment was least likely to occur over the term of the loan.

Lenders may view the underwriting parameters as being not stringent enough and will impose more strict qualifying requirements called overlays. For example, where HUD requires a minimum 580 FICO credit score with a 3.5% down payment to qualify for a FHA loan, a lender may bridge the loan repayment risk with an overlay FICO requirement of 620.

Another typical overlay might be the borrower requirement to pay off all outstanding debts prior to loan commitment, even though it is not an FHA underwriting condition. An increase in Fannie Mae, Freddie Mac or FHA recommended debt-to-income ratios is also a possible overlay imposed by a lender.

Even though a borrower may qualify for a loan under the parameters created by these programs, a final loan commitment will always be subject to what the lender overlays require. If the borrower can’t qualify with one lender, it doesn’t mean the loan cannot be approved through another lender.

As your lending partner, you have my assurance that I will make every effort to make a home purchase a reality for you. I am always here to help. Call or email me for an appointment to start the process.