The Basics

THE LOAN ESTIMATE

What is this? When will I receive it?

Once we have an official loan application, typically created when we get the address of the property you are purchasing. An estimated value, every lender in America is required to send you a Loan Disclosure package timely.

 

This loan package contains the loan estimate. Which better helps to show you the detail of your home loan, including rate, terms, loan amount, closing costs, and then cash to close. More on this later, but this is the essential part of getting your “Official Loan” started.

 

THE APPRAISAL

What is an appraisal? Why do I need one?

The appraisal of the property purchased is one of the most misunderstood facets of the buying process. Typical questions asked about the appraisal process are answered for your below.

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The appraisal provides an estimate of the value of the property. The information in the appraisal is necessary to evaluate whether or not the property has adequate security for the loan. And an appraisal is a report made by a qualified person setting forth an opinion or estimate of value. An independent appraiser inspects the property, neighborhood, and at least three other properties of comparable size and style.

 

Before the lender makes a loan on a property, an estimate of value is required. It is common for lenders to require that appraisals conform to the Uniform Standards of Professional Appraisal Practice. This process occurs to make sure that consistent, detailed information is provided on all appraisals. It is providing for protection for both the banks and you, the buyer's investments.

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What does it cost?

The fee for a standard residential appraisal is generally a standard fee for a given geographic area. Typically, that is approx $450 in today's world. If the subject property is an upper bracket home, the cost may be more. Also, some investors may require more than one appraisal. 

 

If a government loan (FHA, USDA, or VA) is obtained, the fee is regulated by the governing agencies. Typically appraisals range from $475 to $500.

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Can I get a copy of the appraisal?

Yes, you are entitled to a copy of the appraisal.

 

Changes made with the Dodd-Frank Act required lenders to give you a copy of your appraisal at least three business days before closing. After all, you paid for it! 

 

If there are any issues as to value or issues about the structure, we will inform you as soon as we know there are any issues.

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When will it be done?

After we receive your real estate contract, First State Bank Mortgage will send you a loan application package to review. This shows the terms of your loan. We are looking for your ‘intent for us to proceed’ with the terms we discussed.

 

So, once we have your real estate contract, your intent to proceed, and your approval to order the appraisal [typically after your home inspections], First State Bank Mortgage, will order an appraisal of the property. 

 

 The turn-around time for an appraisal is typically 7 to 10 business days but can take longer depending upon the workload of the appraisal industry in general.

 

 

THE BASICS FOR QUALIFYING - HOUSING DEBT

28% Housing Debt

The Fannie Mae / Freddie Mac guidelines say that no more than 28% of your gross monthly income should go towards your housing payment (sometimes called the front-end ratio).

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36% Total Debt

The Fannie Mae / Freddie Mac guidelines say that no more than 36% of your gross monthly income should go towards all of your debt, including housing, plus car loans, installment loans, credit cards, etc.

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However, with our automated underwriting systems, we may have more flexibility on ratios, depending upon the entire borrower’s financial profile

 

 

THE CLOSING - SETTLEMENT AND CLOSING

Once we have your loan conditionally approved, First State Bank Mortgage will be sending you an Initial Closing Disclosure. This Closing Disclosure will mirror the loan estimate and allow you to compare the estimates we started with and then any changes made, on your behalf, as the loan progressed.

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At this point, 

· You should have decided on your own homeowner's insurance policy. If not, you need to make that decision quickly. Your insurance agent should call to exchange some mutual information about the insurance policy and mortgage loan.

 

· We will order the survey, if needed, and coordinate the appropriate delivery of title work and loan documents for your closing. We will be scheduling your closing. So please call us to coordinate a time convenient for you.

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· When you receive the initial closing disclosure, you should acknowledge this as soon as possible. You are required to receive this at least three business days before closing!

 

 You should also call me to review the numbers, to know that this is an initial estimate for closing, but should have most of the closing details of your loan available.

·   In the next 24 to 48 hours before your loan closing, the title company and my team closer will balance the Final Closing Disclosure with the seller’s info.  

 

 Included in this number, which may not have shown up in the initial closing disclosure, are tax pro-rations, HOA fees, if applicable, and any required HOA pro-rations

·   You need to have a valid Photo ID for notary purposes at closing. 

 

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ESCROW ACCOUNTS

It is typical that when a borrower makes his house payment that it includes principal, interest, taxes, and insurance (PITI). When you make your monthly house payment (PITI), we will keep an account of your money to pay Real Estate Taxes and Home Owner's Insurance when they become due.

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Each year, about February or March, your lender will review your account to show the status of the payments, the balance in the account, and the anticipated cushion. If adjustments are needed, this is when you will be notified.

 

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WHAT OTHER EXPENSES WILL I HAVE?

The money that you will have to spend and when you have to pay varies from loan to loan. Some items, like Earnest Money (EMD), are dependent upon the Real Estate Contract. Typical expenses are:

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Earnest Money Deposit: Varies

· As part of the negotiations for a home purchase, as a buyer, you will give an Earnest Money Check [EMD] as part of your good faith to purchase a seller's home. The EMD can be given to a builder, title company, or listing the company's escrow account.

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Commitment Fees: Varies

· Commitment fees are collected for various loans. A commitment fee may be required when locking your loan for an extended period or when loan approval is issued for a building job. A commitment fee may or may not be refundable. This should be discussed when reviewing your loan expenses.

 

Termite Inspection: $75-$95

· A pest inspection is usually required on a Conventional loan and always necessary for a Government loan.

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Whole House Inspection: $395-$475

· While not required, "buyer beware" is the best advice. Your Realtor can offer the name of several companies that can inspect heating & air conditioning, electrical, plumbing, etc.

 

Environmental

· You may want, or your company's relocation department may require you to have certain environmental inspections made. Ask your Realtor for guidance in this area.

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Radon: $100-$150

 

Septic Systems: $175-$220