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- Areas we will focus on during our time together:
- Budgeting
- Credit
- Finding a lender
- Required documents
- Mortgage loan products
- What’s happening in today’s mortgage market?
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- Budgeting
- Important to know how much we can spend
- Sometimes difficult to put together and much harder to live by
- Perhaps a change of name to…
- “Financial Freedom Plan”-Steve Diggs, Author, No Debt, No Sweat
- “Cash Flow Plan”-Dave Ramsey, Financial Counselor, Talk Show Host
- Budgeting is especially important when considering purchasing a
- house or when trying to decide whether to refinance an existing
- mortgage.
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- Budgeting
- You need to consider everything that may be included with your
- monthly mortgage payment. There are other items that may be a part
- of your payment besides the principal and interest portion of your loan.
- These include:
- Property taxes (County and City)
- Homeowners Insurance
- Homeowner Association dues
- Mortgage Impairment Insurance (MIP)
- Flood Insurance
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- Monthly Mortgage Payment Detail
- Principal and Interest amount ($150,000 loan/7.00%/30 yr.) $ 997.95
- Property taxes (County-$600/year divided by 12) $ 50.00
- Homeowners Insurance ($360/year divided by 12) $ 30.00
- Homeowners Association dues ($120/year divided by 12) $ 10.00
- Mortgage Impairment Insurance($2400/year divided by 60) $ 40.00
- Total Monthly Payment Amount $1127.95*
- * The additional items add $130 per month to the payment amount!
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- Credit
- Hopefully, you have some idea on how your credit report looks to
- potential lenders. If not, you can go to:
- https://www.annualcreditreport.com
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- Credit
- To correct inaccurate or incomplete information in your credit report.
- Tell the Consumer Reporting Agencies (CRA) in writing.
- Tell the creditor or other information provider in writing.
- For more information on resolving inaccuracies you can contact the
Federal Trade Commission at:
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web site http://www.ftc.gov
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1-877-382-4357
- write
to: Federal Trade Commission
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Southeast Region
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Suite 1500
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Atlanta, GA 30303
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- Finding a Lender
- Of course, before finding a lender, you need to find a house that fits
- within your budget and negotiate a completed purchase contract on
- the property with the seller, or realty company.
- Finding a lender, especially one that you can trust, may prove to be
- harder than you think! There are a few things that you want to
- consider:
- Reputation
- Are they licensed?
- Fees and charges
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- Finding a Lender
- If you want to check on the reputation of a potential lender that you
are
- considering to use, the best place to check is the Better Business
Bureau.
- In the Knoxville area you can go to:
- http://knoxville.bbb.org
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- Finding a Lender
- If you are uncertain on whether a lender is licensed, you can either
- contact the Tennessee Department of Financial Institutions at 1-800
- 778-4215, or look us up online at: www.tn.gov/tdfi From here, go under
- the Department Resources, General Information headings and click on
- the link for Listing of Regulated Entities. This has the companies
- broken out in alphabetical order based on their industry.
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- Finding a Lender
- Some other areas that you can check are:
- The Internet
- Radio and television advertisements
- Word of mouth from family members, friends, or co-workers who may have
used a particular company and had a good experience using them
- Newspapers (i.e. The Tennessean newspaper on Sundays carries a listing
of area mortgage companies in the Homes section each week.
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- Finding a Lender
- Some of the fees or charges that you need to know are:
- Origination fee
- Discount points
- Mortgage broker fee
- Appraisal fee
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- Origination Fee
- An origination fee is a fee for establishing a new loan. This fee is
paid to the bank or your loan broker for his or her services in
originating the loan.
- The fee usually varies from 0.5% (half a point) to 2% (two points) of
the loan amount.
- An origination fee of 2% on a $200,000 loan is $4,000.
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- Discount Points
- Discount points are fees paid to a lender at closing in order to lower
your mortgage interest rate. The cost of each point is equal to one
percent of the loan amount. For instance, for a $100,000 loan one
discount point equals $1,000.
- Paying for points lowers your interest rate, because the lender receives
the income in a lump sum at closing rather than collecting the interest
as you make payments on your loan.
- Each discount point paid on a 30-year loan typically lowers the interest
rate by 0.125 percent. That means a 7.5 percent rate would be lowered to
7.375 percent if you purchase one point.
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- Mortgage Broker Fee
- A mortgage broker is an independent contractor who acts as a middleman
between borrowers and lenders. A good mortgage broker will be able to
check available loans from a variety of lenders, and can seek out a
mortgage which best suits the needs of a particular client.
- The broker is paid a fee, typically a commission based upon the amount
borrowed, in return for finding the mortgage. This fee may range between
one to three percent of the loan amount.
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- Appraisal Fee
- An appraisal fee is a fee sometimes charged during closing costs, or it
may be paid directly for a qualified professional appraiser to perform
an appraisal or an estimation on the market value of a property.
- The appraisal fee will vary depending on the specific characteristics of
your home and the type of appraisal done. Appraisers may charge one fee
for a single family home and a larger fee for duplex, fourplex, or a
commercial building.
- The typical appraisal fee for a standard owner occupied single family
tract home, condominium or town home is anywhere from $200 to $500.
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- Required Documents
- Certain federal statutes, namely the Real Estate Settlement and
- Procedures Act (RESPA) and The Truth in Lending Act, mandate
- specific pre-loan and closing disclosures that a consumer should
- receive as part of the mortgage loan process. Within the statutes are
- the time periods in which these documents should be delivered to the
- consumer for their review. On the pre-loan disclosures, the time period
- is with three business days of making application for the mortgage
- loan.
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- Required Documents
- The following are a few of the documents required by either RESPA or
- the Truth in Lending Act:
- Good Faith Estimate of Settlement Costs
- Advance Truth in Lending Disclosure
- Transfer of Servicing Disclosure
- Consumers Handbook on Adjustable Rate Mortgages
- Notice of Right to a Copy of Appraisal
- HUD Settlement Statement
- Notice of Right to Cancel
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- Good Faith Estimate of Settlement Costs
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- Good Faith Estimate of Settlement Costs
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- Good Faith Estimate of Settlement Costs
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- Good Faith Estimate of Settlement Costs
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- Advance Truth in Lending Disclosure
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- Advance Truth in Lending Disclosure
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- Transfer of Servicing Disclosure
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- Transfer of Servicing Disclosure
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- Consumer Handbook on Adjustable Rate Mortgages
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- Consumer Handbook on Adjustable Rate Mortgages
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- Notice of Right to a Copy of the Appraisal
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- Notice of Right to Cancel
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- 100% Loan-to-Value Transactions
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- What’s Happening in Today’s Mortgage Market?
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- In the News
- The federal government, through various agencies, has taken recent
- steps to help those consumers that either are possibly facing
- foreclosure, or else they have already been foreclosed and need
- assistance from the possible tax consequences of this action.
- Mortgage Forgiveness Act of 2007-This Act will create a three-year
- window for homeowners to refinance their mortgage and pay no taxes on
- any debt forgiveness that they receive. Under current law, if the
value of
- your house declines, and your bank or lender forgives a portion of your
- mortgage, the tax code treats the amount forgiven as income that can be
- taxed.
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- In the News
- Tennessee has adopted the non-traditional mortgage guidance that was
provided by the four federal bank agencies and the National Credit Union
Administration. This was also endorsed by the Conference of State
Banking Supervisors and the American Association of Residential Mortgage
Regulators.
- One of the primary criteria placed on lenders is that they determine a
borrower’s ability to pay on the fully-indexed rate when considering an
Adjustable Rate Mortgage product.
- Additionally, the Tennessee General Assembly passed the Tennessee Home
Loan Protection Act in 2006 that our Department began regulating in
January 2007. This defines high-cost mortgage
- transactions for the first
time.
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- Alan E. Smith
- Assistant Commissioner
- Consumer Resources Division
- Tennessee Department of Financial Institutions
- 414 Union Street, Suite 1000
- Nashville, TN 37219
- 615.532.1024 or 1.800.778.4215
- E-mail: alan.smith@tn.gov
- Web site: www.tn.gov/tdfi
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Notes
