Buying a home is an exciting milestone, but it can also feel overwhelming, especially when it comes to understanding your loan estimate. This comprehensive guide will walk you through the key sections of a loan estimate, empowering you to make informed decisions about your mortgage.
Section A: Origination Charges
Origination Charges are fees from your lender related to the interest rate chosen during the home/rate shopping stage. These fees may be offset by credits, noted in Section J, making them an essential part of your loan estimate.
Section B: Non-Shoppable Services
These are services that you cannot shop around for:
- Appraisal: Costs vary based on transaction type—typically around $600 for primary purchases and $800-$900 for investment purchases/refinances. Rush fees may apply.
- Credit Report: Covers the cost of pulling your credit score and listing current monthly debts.
- Electronic Registration (MERS): Registers your loan on a national database for servicing.
- Flood Certification: Determines if your property is in a flood zone.
- Tax Service: Alerts to unpaid taxes and ensures no property liens.
- Title – Attorney Document Preparation: Fees for Texas Attorneys drafting legal documents like the Deed of Trust.
Section C: Shoppable Services
You can shop around for these services:
- Survey: The cost for obtaining a new survey ranges from $450-$600, more if an elevation certificate is needed.
- Title – Endorsement: Provides coverage beyond a standard policy, potentially preventing costly expenses.
- Premium for Lender’s Coverage: Protects your lender against property title issues.
- Settlement or Closing: Title companies charge this fee for their services during the loan process.
- Tax Cert/Guaranty: Covers ordering your Tax Certificate to determine proper property taxes and HOA costs.
Section D: Total Loan Costs
This section totals the costs from Sections A, B, and C, giving you a comprehensive look at your loan expenses.
Section E: Taxes and Other Government Fees
Includes recording fees and taxes to properly record documents like the Deed of Trust and Warranty.
Section F: Prepaids
Includes:
- Homeowner’s Insurance Premium: 12 months insurance paid at closing.
- Prepaid Interest: Interest charged from your close date through the end of the month.
Section G: Initial Escrow Payment at Closing
Details the initial escrow account setup, typically requiring three months of insurance and taxes at closing if you choose escrow payments.
Section H: Other
May include HOA Transfer costs not disclosed on your loan estimate but added to final closing documents via Title and Tax Certificate information.
Section I: Total Other Costs
Totals costs from Sections E, F, G, and H for a complete picture of additional expenses.
Section J: Total Closing Costs
This section combines Section D and I totals, reflecting any credits associated with your interest rate, known as discount points.
Calculating Cash to Close
Summarizes the total amount needed at closing, including:
- Total Closing Costs (J): All costs associated with your loan, detailed in Section J.
- Down Payment/Funds from Borrower: Your initial home investment, subtracted from the total home cost.
- Deposit: Earnest and option money provided per your Purchase Contract.
- Seller Credits: Any seller concessions at loan submission, updated as needed.
- Adjustments and Other Credits: Policy credits, advance-paid items, or costs to be paid.
Additional Items to Look For
- Condo Certificate Fee: $150 if purchasing a condo for HOA and other info.
- Employment Verification Fee: $50 for verification fee if charged by your company.
- Appraisal Final Inspection Fee: $200 cost for ordering a Final Inspection if appraisal is “Subject To.”
- Mobile Notary Fee: $150 charge for mobile notary signing, per the Title company.
By understanding these sections, you’re better equipped to make confident decisions about your mortgage loan. If you have any questions or need further clarification, please don’t hesitate to reach out to us.
