There were a lot of things that came into play with getting our first mortgage. And being first-time home buyers, there were also plenty of things we didn't know. This was back in 2007 when things were still pretty decent with the housing market and people weren't so wary of lenders and the loans being provided by these financial institutions. Even then, we got fairly lucky with our particular lender. They were very up-front with us and provided us with a variety of resources and documentation to ensure that we were well educated regarding the financial responsibility we were undertaking with our mortgage.
One tool in particular with which they provided us was a "good faith estimate". This document helped us better understand our mortgage in several key areas.
Taxes and Fees
It's amazing how many taxes and fees can be involved in buying a home. And frankly, as first-time homebuyers, it was shocking just how much those taxes and fees added up to when everything was said and done. This is why it can be so important to get that "good faith estimate" up front.
Ours looked something like this:
- Appraisal Fee -- $300.00
- Credit Report -- $9.90
- Tax Service Fee -- $72.00
- Processing Fee -- $325.00
- Underwriting Fee -- $375.00
- Flood Certification Fee -- $4.00
- Prepaid Interest -- $175.00
- Settle/Close Fee -- $250.00
- Title Insurance Fee -- $400.00
- EPA - ALTA Endorse 8.1 -- $75.00
- City/County Tax - mtg -- $2,250.00
- Additional Recording Fee -- $75.00
- Courier Fee -- $25.00
- Hazard Insurance -- $975.00
- Cook County Taxes -- $3,000.00
- Aggregate Adjustment -- $-375.00
Total Estimated Charges, $7,935.90…ouch!
Monthly Payment Analysis
Our loan estimates were based upon a higher amount than we actually received due to our putting a larger down-payment upon our home. However, our good faith estimate's monthly payment analysis at least provided us with a general idea of what we'd be looking at were we to utilize the entirety of our loan amount.
This portion broke down our monthly payment between the following:
- Principal and Interest
- Property Taxes
- Hazard Insurance
- Mortgage Insurance (NA for our loan)
- Flood Insurance (NA for our loan)
- Other (NA for our loan)
This gave us a total estimated monthly payment so that we knew exactly what we could be getting ourselves into when it came to our regular financial obligation.
The program information section of our good faith estimate provided a broader look at our loan situation. This broke our loan information down into the following:
- Sales Price
- Total Loan Amount
- Type of Loan (Conventional)
- Interest Rate (5.25%)
- Loan Term (180 months)
- Loan Amortization (Fixed Rate)
Funds to Close Summary
And finally, there was a section that provided us with our estimated funds to close. This gave us an idea -- after our loan amount was taken out of the sales price of our home, and closing costs and prepaids were factored back in -- of how much in money for these items and our down-payment would be due at closing.
This can be a critical aspect to the home purchase process as it can provide the amount of cash necessary to actually complete the home-buying scenario.
With all this information at our fingertips, there was little confusion as to what we were getting into when it came to our mortgage and no excuse for not being prepared for the responsibilities that came with this financial agreement.
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The author is not a licensed financial, mortgage or real estate professional. The information provided in this article is for informational purposes only and does not constitute legal, financial, mortgage or real estate advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.