“Being a Realtor is about Individuals who live in Dwellings”






Mickey Dobo's Real Estate Fact-Pack

Points
Each point equals one percent of the loan amount. They are paid directly to the mortgage bank or investor for offering the loan at a given interest rate. Points are quoted with the rate, ie. 10% with 2 points. They are considered as pre-paid interest by the I.R.S. and are tax deductible. Points are a negotiable item: either the seller, buyer or both may pay the points.

Origination Fee
The origination fee is a one-time charge by the lending institution for originating and handling a loan for the full term of that loan. This fee covers the cost of maintaining a current and adequate escrow account to pay the taxes and hazard insurance. In some cases, this fee is quoted with the points, ie. 10% with 2+1. This fee is usually 1% of the loan amount.

Escrow Account
This account is a non-interest or interest bearing account set up as a holding account controlled by a disinterested third party. Real estate companies and attorneys have these types of accounts. Taxes and insurance are held out and deposited in escrow to be used at renewal time.

Earnest Money
Earnest money is part of the purchase price paid in advance to bind a Purchase agreement. If a buyer can't qualify for a loan, it is refunded if everything has been disclosed. The earnest money is held in escrow account,traditionally with the listing broker.

Prepaids
This is part of the closing cost (see attached closing cost sheet) and is used to initiate the escrow account. The mortgage banker subtracts money for the taxes and insurance from the payment each month and deposits it in the escrow account. When the taxes and insurance are due, the mortgage banker pays them with the accumulated funds. A minimum of two months in advance is required when initiating this account.

Mortgage Insurance Premium and Private Mortgage Insurance Premium - M.I.P. & P.M.I
A standard loan is 80% loan to value (LTV) with 20% as down payment. A $100,000 home would require a $20,000 down payment. In most cases, there is not enough cash available for a 20% down payment plus closing cost and points. When this occurs, a 95% loan to value (LTV) mortgage is called for. Only 5% of the price is required for the down payment, plus points and closing costs. The lending institution is lending 15% more and considers this a 15% higher risk. Therefore, the buyer must pay for an insurance policy that covers the top or extra 15% of the loan against default. The property stands as security for the remaining 80%. With most loans this insurance policy can be financed with a monthly premium paid with the payment. As soon as the top 15% of the loan has been paid and the loan is at 80% LTV, the buyer may request that the insurance policy be dropped, thereby reducing the monthly payment. With a 30 year loan it usually drops to 80% LTV in about 10 years. M.I.P & P.M.I is usually .03793% of the mortgage amount.

Title Insurance Policy
A title insurance policy is a policy that protects the buyer and the lending institution against any clouds on the title. Clouds on the title are any encumbrances, liens, mortgages or unauthorized deeding of the property that the previous owner may have executed and did not disclose prior to the title search. Title insurance is required by all lending institutions. If any clouds on the title are uncovered they must be cleared before closing.
Simultaneous Title Policy Issuance: This is a second policy that is issued at the same time and by the same title company. In essence, the research has been completed for the Title Policy, and all that need be accomplished is a simple assigning of names to the second policy. You will be required to furnish this policy to the lender. The first policy is an owners policy, which you receive. The Simultaneous Issuance can be assigned to the buyer or the seller and is a separate policy. Whomever it is designated for will pay the lesser of the fees. Upon reselling the property, the title company will usually give a discount on the next policy issued.

Hazard Insurance Policy
This is an insurance policy that covers the home owner and the lender against loss caused by fire, hail, falling trees etc. The hazard insurance policy company is of the buyer's choice. This policy must meet certain standards required by the lender and is known as a HOMEOWNERS POLICY. Flood insurance is usually excluded from the homeowners policy. All lenders require a homeowners policy in the amount of the loan, but it is best to cover the replacement value.

Equity
Equity is the value of property beyond the amount owed on it.

Loan Assumption
Assumptions can be for fixed or adjustable rate mortgages. In an assumption, the buyer assumes the obligations of an already existing mortgage on property. All monies paid by the buyer goes to equity. In the case of new mortgages 5% to 7% of the cash used up front is consumed by closing cost, origination, prepaids and M.I.P. Therefore, the ideal buying situation involves an assumption because most of these fees have already been paid. When you assume a loan you are taking over the already established rate structure of the sellers mortgage. You can assume the existing payment, escrow, taxes and insurance. Closing coasts are a minimal in most cases, less than 1%. Assumable loans are FHA, VA. Conventional loans can be assumed if the lender permits.

    Loan Procedures
  • Buyer makes loan application, authorizes and signs verifications for bank deposits, income and employment.
  • Buyer pays for appraisal and credit report then lender orders same.
  • While waiting for the credit report and appraisal, lender will send out all of the verification forms to appropriate sources.
  • When all these forms are returned to the lender, the buyer returns to the lenders office to sign the final copy of the loan application. The loan can then be submitted for approval, usually to an in-house underwriter.
  • The lender then sends the preliminary packet to the closing attorney. The attorney orders the title search and policy.
  • The lender will review the appraisal to see if appraised value meets market price. They will also checks for needed repairs. After repairs are completed, an inspector check specifics and quality of finished repairs and then releases the appraisal.
  • After the loan has been approved and paperwork is completed, the lender will prepare the closing instructions for the closing attorney, then send the package and closing instructions to the attorney.
  • Closing date and time will be set--then the home is yours!

Closing Costs
Closing Costs are the moneys paid to facilitate the closing of the loan and/or transaction.

    Sellers Cost
  • PAYOFF OF FIRST MORTGAGE
  • PROPERTY TAXES (DEBIT)
  • COMMISSION
  • CLOSING FEE
  • DOCUMENT PREPARATION
  • TITLE INSURANCE
  • UNDERWRITING
  • PEST INSPECTION
  • CODES INSPECTION (SEPTIC)
  • MISCELLANEOUS
    Buyers Cost (FHA)
  • CONTRACT SALES PRICE
  • PRINCIPAL AMOUNT OF NEW LOAN
  • PROPERTY TAX (CREDIT)
  • LOAN ORIGINATION
  • APPRAISAL
  • CREDIT REPORT
  • HAZARD INSURANCE
  • HAZARD INSURANCE (ESCROW)
  • PROPERTY TAXES (ESCROW)
  • CLOSING FEE
  • DOCUMENT PREPARATION
  • RECORDING FEES
  • SURVEY
    Buyers Cost (Conventional)
  • CONTRACT SALES PRICE
  • PRINCIPAL AMOUNT OF NEW LOAN
  • PROPERTY TAX CREDIT
  • LOAN COMMITMENT FEE
  • APPRAISAL FEE
  • CREDIT REPORT
  • HAZARD INSURANCE
  • MORTGAGE INSURANCE
  • INSURANCE (ESCROW)
  • M.I.P. (ESCROW)
  • PROPERTY TAX (ESCROW)
  • CLOSING FEE
  • DOCUMENT PREPARATION
  • RECORDING FEES
  • SURVEY

Appraisal
An appraisal determines the dollar value (LTV loan to value) of a property relative to the market in which the home is located. This is to insure that the home in question is worth the agreed upon sales price. Basically the lending institution does not want to lend you more than the property is worth. In some cases the appraisal may require repairs to be accomplished prior to closing to bring the home in compliance with the lenders standards. Appraisals are mandatory and is one of the first steps in obtaining a loan. The appraisal fee is usually paid at the time of loan application.

Home Inspection
If a purchaser so chooses they may hire a independent home inspector (this can be any one they trust and who they deem to be competent, there are professional home inspectors) to preform a whole house inspection or to inspect specific items. A report is then given disclosing the status of the inspected items. The report can be written or oral. This is not to be confused as appraisal.