The Cost of Buying a Home

Hubby and I are clear to close on our first house and will be signing papers on Monday! Whoo Hoo!  I remember in the beginning of this long process (we are now five weeks past our original closing date) how confused and stressed I was trying to get an idea of how much money we needed to have by closing day.  Our lender gave us three separate Good Faith Estimates (GFE), none of which were in the same ballpark as the others and I really didn’t understand all the items listed.  After much research and after receiving the final HUD-1 statement, I thought I would share our experience with the finances of actually buying a home.

Our loan was an FHA on a mobile home that had been, in many ways, rebuilt.  The current owner is a contractor and bricked in the home, remodeled the kitchen, added a new roof and more insulation, did some foundation work, replaced all the windows and plumbing, put up drywall and replaced the floors.  It doesn’t look like a mobile home anymore, either inside or out, but for financing purposes it must still be treated as such.  Below is an itemized list of all the costs we incurred during this process along with what we were initially estimated for those costs and explanations as to what each item actually represents.

Name

Estimate

Actual

 

 
Down Payment

$XXXX.XX

$XXXX.XX

   
FHA Upfront MIP

$1,942.00

$1,942.00

   
Homeowner’s/Flood Insurance

$1,440

$2,185.00

   
Appraisal + Credit Report

$607.00

$607.00

   
Home Inspection

(?)

$325.00

   
Termite Inspection

(?)

$250.00

   
Engineer Inspection

N/A

$250.00

   
Attorney Fee

(?)

$425.00

   
Title Services Fee

$(971.00)

$225.00

   
Survey

$500.00

$0.00

   
Lender’s Title Insurance

$362.00

$372.00

   
Owner’s Title Insurance

$176.00

$176.00

   
Origination Charge

$750.00

$750.00

   
Manuf. Housing IBTS

$60.00

     
Well Inspection

$300.00

$0.00

   
Septic Inspection

$225.00

$0.00

   
Flood (Life of Loan)

$19.00

$19.00

   
Tax Service Fee

$70.00

$70.00

   
Mortgage Recording Fee

$30.00

$30.00

   
Deed Recording Fee

$10.00

$11.00

   
State Deed Tax Stamp Fee

$299.00

$299.00

   
City/County Deed Tax Stamp

$126.50

$126.50

 

 
Interest

$231.15

$170.85

   
Real Estate Tax Escrow

$385.47

$172.00

   
Insurance Escrow

$480.00

$546.00

   
         
Total Estimate

$7,510.62

     
Total Actual  

$8,514.85

   
         
         
    Difference of $1,004.23 or 13.4%  

The down payment is pretty self explanatory and it didn’t change from our beginning estimate.  The MIP insurance is a “Mortgage Insurance Premium” required for FHA loans and will be added to the principal of our mortgage.  We will also pay a monthly MIP along with our mortgage payment.  MIP’s are charged when you have less than 20% down payment, it’s a way for lenders to have some extra insurance in case you default on your mortgage and they have to take a loss trying to sell the property.  In a few years after we have paid down the mortgage to 78% of its original amount, the monthly MIP will be dropped.

The homeowner’s and flood insurance are for one year’s policy, which must be paid up front.  Insuring mobile homes directly on the coast in hurricane central is expensive, and the estimate was way off.  We were lucky to find a company who was willing to insure it at all.  

The appraisal and credit report check was paid the day we applied for the loan.  The home and termite inspections were not included in the GFE.  Several weeks into the process our bank asked for another inspection from an engineer to confirm that all the extra work on the home had not compromised its structural integrity.  We paid the inspector by check, or Outside Of Closing (OCO).  Our attorney’s fee was also not included in the GFE.

The title service fee in the GFE included a survey and title insurance, but we ended up not needing a survey.  The sellers still had their survey from when they purchased the home, the boundary markers and fence was still in the same place, and the survey was less than ten years old, so it was not necessary to get another one. The numbers don’t match up because they were taken from two separate GFE’s, one which itemized the title services and one which lumped them together.

The origination charge is a fee from the lender for their services—primarily administrative paperwork processing. The IBTS charge is a report confirming the mobile home’s HUD tag and serial numbers.  The sellers already had the report so while it was on the GFE we didn’t have to pay it.

The FHA rules had recently changed and so we did not need to get a well or septic inspection.  The reason for that was because at the time of the appraisal the home was still occupied by the sellers, and the appraiser could see that everything was in working order.

The Flood (life of loan) is a fee charged by the lenders for tracking the status of the property’s flood zone over the life of the loan.  If the flood zone category changes, it would affect what kind of insurance the home qualifies for.  The tax service fee is a charge for setting up the escrow accounts for the home’s yearly taxes and insurance.  Our monthly mortgage payment will include 1/12th of the cost of our yearly insurance and tax bill, and the lender will pay these bills our of the escrow account.

A mortgage is basically a lien against the property, and all liens must be recorded with the county to be valid.  The mortgage recording fee is the county’s fee for recording the mortgage.

The Deed recording fee, State deed tax stamp and City/County tax stamp are all related to making sure the deed to the property is sellable.  Our contract stated that the seller would be responsible for all fees related to making the deed sellable.

The interest charge went down because we closed later than our original closing date.  The interest is charged on a per-day basis until the end of the month to cover the interest on the mortgage until the first payment comes due.  So in our example, we originally planned to close on June 7th, leaving 23 days until the end of the month.  Now we plan on closing the 15th of July, leaving only 16 days until the end of the month, so fewer days to pay interest on.  Our first actual mortgage payment will be due on September 1st and will pay for the interest accumulated in August.

The Real Estate Tax Escrow is to pay for our portion of this year’s property taxes (the seller will be reimbursed for the months they do not own the home) and to provide a three month buffer for our escrow account.  That buffer is designed to prevent any unexpected expenses if our taxes go up unexpectedly.  One of the reasons

The Insurance escrow is also to establish a three-month buffer for our homeowner’s insurance escrow account in the event of an unexpected increase.

The changes occurred at random and ended up being $1,000 over the estimate.  The biggest eye-opener was the fact that many of the charges (home and termite inspection, attorney’s fees) were not even included in the GFE.  My advice is to set aside more cash than you think you will need, because you don’t get the final bill (called the HUD-1 statement) until the day before you close on the house.  Well, hopefully I’ve helped someone out there be less confused on what the process is all about.  Good luck to anyone out there going through this right now! And wish us luck on Monday!

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One Response to The Cost of Buying a Home

  1. Its hard to find knowledgeable individuals on this subject matter, but you seem like you know what youre talking about! Thanks

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