Explanation of Standard Closing Costs & Pre-Paid Items

Origination Fee – lean fee that is charged at usually 1% of the loan amount.  This fee tends to be lower than the interest rate.  It can be negotiated, but the lower the origination fee, the higher the rate will be in most cases.

Appraisal Fee – when the appraisal is completed, the customer will be charged what the appraiser charges for his services.

Credit Report – the cost of pulling the credit report.

Underwriting Fee – when loans are sold, investors charge the banks to do a post-closing underwriting of the file for audit reasons and charge them this fee that gets passed on to the buyer.

Tax Service Fee – a fee that investors charge to monitor the payment of property tax bills and insurance payments.

Flood Certification – banks get a certification from FEMA showing that the subject property is or is not deemed in a flood zone.

Documentation Prep Fee – a fee charged to help banks with the cost of copying and scanning all of the paperwork associated with the buyer’s loan file.

Settlement Closing Fee – charge title companies or attorneys charge to close the loan.

Title Examination – fee charged by title companies or attorneys to do a search of the title on the subject property to ensure that there is a clear title.

Lenders Coverage Insurance – insurance that is charged to cover the lender in case of any title problems during the duration of the loan.

Recording Fees – fee charged by title companies or attorney to record the deed of trust.

State Tax Stamps – tax that goes to the State or County on any new purchases or refinances of real property.

Investor – company that services mortgage loans.

Home Owners Insurance – insurance that covers the home and its contents from fire or disaster.  It is required that one year of premiums are to be paid upfront and put into an escrow account.  There is also a small cushion of reserves set aside to protect you from your monthly payment increasing due to higher premiums.

County & City Taxes – collection of annual city and county property taxes due on your home.  When the tax bill(s) are due, there will be enough money in the escrow account to pay annual property taxes.  The customer will not get a separate bill at the end of the year.

Pump Up Your Appraisal

These small projects are likely to give you a dollar-for-dollar return on your investment and make the home more salable.

Spruce up landscaping

Cost: less than $5,000

Fill in spots in the lawn, add shrubbery, tidy borders, and mulch.

Buy Stainless Steel Appliances

Cost: less than $7,000

Make sure you get brands similar to your neighbors

Refinish existing wood floors

Cost: less than $3,000

Sand, stain, and apply polyurethane to an existing wood floor.

Create a walk-in closet

Cost: less than $2,000

Spend less if you aren’t moving interior partition walls.

Think Like an Appraiser

Knowing how these valuation gurus work can help you figure out what your home is really worth.

When it comes to assessing a home’s value, real estate agents and homeowners tend to be an optimistic bunch.  In the post-bust world, appraisers are a different story.  They have to predict a realistic value for your home that the bank can use to extend credit to a borrower - and that number can make or break your sale or refinance.  Appraisers say the following five areas are where homeowners often misjudge the worth of their abode.

THE OUTSIDE

The appraiser sees: Overgrown bushes and chipped paint.

What he does: Slices as much as 3% off the value of an average-size home

Why: Curb appeal is primo!  And an unkempt yard is a sign that there may be other issues.  “A good-looking lawn and bushes imply that you also take care of the internal systems in the houses,” says Jonathan Miller, president and CEO of a New York City based appraisal firm that works throughout the tri-state area.

Moreover, the more meticulous your neighbors are about grooming, the more your appraiser will downgrade the value of your home.  “If a lot of the nearby properties are professionally maintained, the one that sticks out like a sore thumb will get a harder adjustment than in a subdivision where there’s more variation,” says San Diego appraiser, Armando Ortiz.

BASIC SYSTEMS

The appraiser sees: A brand-new roof

What he does: Nothing

Why: Just a knee replacement won’t make you look 20 years younger, a new roof, furnace, or boiler isn’t considered an improvement to your home.  That said, if your roof is in disrepair, replace it: Signs of leaks or discoloration can knock a significant amount off  the home’s value.  “When people buy a home, they expect the roof to be working,” says Columbus appraiser Mike Armentrout.  “So while a new one isn’t an added feature, it will help your chances of a sale.”

THE BASEMENT

The appraiser sees: A recently finished basement with a half bath.

What he does: Adds about 2% to the value of the home.

Why: Yes, your finished basement adds value, but don’t expect it to count like first-floor space.  The addition of a bedroom and quarter bath on the ground floor could increase your home’s value by up to 20%, especially if you’ve got only one other bathroom.  “A below-ground basement normally isn’t included in the square footage of the house,” says Miller.  The same rule applies to outbuildings like a pool-house casita, painting shed, or studio.

THE MARKET

The appraiser hears: Two nearby homes just went into contract above their asking prices.

What he does: Nothing.

Why: While a broker might pump up a home’s asking price based on the sense that the market is “hot”, by and large, appraisers are bound by the data of recent comparable sales.

What if prices are suddenly up in your area, and you’re nervous that your house won’t appraise for contract price?  In that case, you  might want to delay your appraisal until one of those recently contracted sales closes.

A REMODEL

The appraiser sees: An expensive, custom-made, built-in entertainment center.

What he does: Makes a negative adjustment to the valuation.

Why: “Cost doesn’t equal value,” says Miller.  Renovations that are at all trendy - or not in keeping with the historical period of the home - will be assessed at the cost of ripping them out.  Timeless improvements, on the other hand, such as a deep sink or new wooden cabinets in the kitchen, will add value.  So if you’re thinking of remodeling, ask a local real estate agent to tell you what’s on the wish list of today’s buyers.

Courtesy of: Alison Rogers of CNN Money Magazine

What You're Entitled to if you are Active Duty or a Vet

“It’s hard to say something is free when you’ve given your service for it”, says Katie Savant of the National Military Family Association.  A few earned benefits you might not be aware of:

Private College Tuition for Kids

The GI Bill generally doesn’t fully pay for private college tuition - the max is $18,078 per academic year for post-9/11 vets - but through Yellow Ribbon programs, some schools cover the gap.  These benefits, like those of the GI Bill, can be passed to spouses and kids.  Find info at gibill.va.gov.

Mental Health Services

The Department of Veterans Affairs offers vets access to counselors via videoconferencing through it Telemental Health Program (go to va.gov for details).  Friends and family of soldiers and vets can also get phone help through the VA’s new Coaching into Care program.

Financing Planning Help

The Financial Planning Association offers pro-bono sessions for military families on Yellow Ribbon weekends (yellow-ribbon.mil for info). Also, H&R Block provides members of the armed services with audit help, tax prep, and other advice.

Money for Nursing Care

The Department of Veterans Affairs’ Aid and Attendance program is often overlooked, says Randy Noler of the VA.  Through the program, vets may qualify to receive extra income to cover nursing home care to pay an aide.  Apply via your regional VA office.

Save the Dates!

SEPT 2012	24: Smithsonian Museum Day - Free admission to hundreds of cultural venues nationwide. 29: National Coffee Day - Get a complimentary cup at Caribou Coffee, Thonrton’s or Krispy Kreme. 29: National Public Lands Day - Free admission to ALL U.S. National Parks.
OCT 2012	24 - 30: Free admission to LegoLand Parks (Parks are located in California and Florida>
NOV 2012	10 - 12: Free entrance to National parks. 12 - 16: National College Application Week - Students can apply to public schools in certain states without charge. 12: Veterans Day - Active duty and retired service members are fed free at Applebee’s, Golden Corral, Olive Garden, & Chili’s.
DEC 2012	1 - 2: Free admission to more than 150 museums through Bank of America’s “Museum on Us” program, for account holders. 17: Free Shipping Day - Participating retailers include Macy’s, Sears, and Overstock.com.
JAN 2013	19 - 21: Free entrance to National parks.
FEB 2013	28: IHOP National Pancake Day - Get a short stack on the house.
MAR 2013	20: Free Italian Ice at Rita's.
APR 2013	3: Free cone day at Ben & Jerry's. 11: Free cheese fondue at The Melting Pot restaurants. 15: Tax Day - Reward yourself with a 10-minute massage at Hydro Massage, then shred up to five pounds of paper at Office Depot. 22: Earth Day - Pick up a reusable bag at Target Guest Services for free.
MAY 2013	4: Free Comic Book Day - Pick up an issue at participating retailers. 8: Free cone day at Haagen-Daz. 12: Free entrance to public gardens.
JUNE 2013	7: National Doughnut Day - Enjoy one at Krispy Kreme and LaMar’s Donuts. 15: Try a free smoothie from the Tropical Smoothie Café. 16: Father's Day - Dad’s can get a free breakfast at Ikea. Then take them for a free cone at TCBY stores.
JULY 2013	11: Free 8 oz. Slurpees from 7-Eleven stores (on 7/11!)