I was suppose to close on my mortgage, FHA Streamline, when I went to the closing attorney's office with my lender, I was told that I needed

Asked by Wessie, 30013 Sat Sep 26, 2009

$2,900 in closing fees, not only that my loan amount went from 250K to 263K, wow! needless to say I walked away from that deal. The interest rate was 5% with 3/4 of orgination fees. I'm so confused!

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, ,
Tue Oct 20, 2009
To give you a thorough explanation of the streamline offering, there are actually two kinds of FHA streamline refinances: One is where you get a market interest rate and pay cash for the closing costs or finance them in the loan amount. The second method would be where you pay a sligthly higher interest rate and have the lender finance the closing costs into the interest rate. An example of the first method would be 5.125% with closing costs as compared to the second method with a rate of 5.625% with no closing costs and absorbed by the lender.

Now there are two other things that have to be considered in terms of the cash involved with Streamlines that are really not closing costs but money that has to come from somewhere. One of these categories is the prepaid items that are required to set up your new escrow account for property taxes and insurance as well as prepaid interest, which is determined based on the closing date. The amount of property taxes and insurance collected are determined by their due dates. Keep in mind, though, that any money in your existing escrow account will be refunded to you once the loan is paid off via the refinance. So that should really be a wash in terms of the cost to refinance.

The second thing involved in a streamline refinance is the FHA mortgage insurance. If you are refinancing your existing loan within the first five years of the loan, there will be a partial credit for the up front mortgage insurance that was collected on your original loan. Then, on the new loan, the mortgage insurance has to be collected again.

Finally, the other confusing thing about Streamline refinancing involves the appraisal. In order to finance the closing costs, you typically have to get a new appraisal and hope that the property appraises for more than you paid originally so that the loan to value does not exceed 97.5%. In cases where that is unlikely, a method is available without an appraisal where the closing costs can be absorbed in the higher interest rate or paid in cash so that the new loan amount does not exceed the original loan amount.

So as you can see, the FHA streamline process is somewhat complicated and should only be pursued with a loan officer that is fairly familiar with the process. I hope that helps....
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, ,
Mon Sep 28, 2009
The $2900 could have come from back taxes or escrow changes. The lender cannot change your fees that affect the APR without putting the loan off for 4 business days (new MDIA law) and giving you time to consider doing the loan. So, most likely, it's not a closing cost increase, rather an attorney fee or escrow issue. Second the loan amount going up includes a lot of things, not just closing costs and I'm sorry that the L.O. didn't go over this with you in full detail. Closing costs for a $263,000 loan are about 2% ($5000). Second, your escrow is included. In GA, you can figure about 1.5% on average for taxes and about $700 annual for insurance. Your county (which I'll leave out) taxes are paid in Oct and Dec which means the lender had to escrow for 12 months ($1800). Insurance is based on the date you last took out a policy, but for argurment sake, we'll say the lender had to escrow 12 months ($700). Interest due at closing? You closed mid month? ($500). All that increases the loan amount. Next, your funding fee (1.5% for streamline) is included in that amount ($3000). Several banks in GA didn't pay the escrow correctly for 2008, so they are collecting back taxes. Another reason may be that your balance is not your payoff. Payoffs are the balance plus one payment. Your loan probably went from $252K to $260k but with the funding fee had total money borrowed at $263k. You're welcome to send me the HUD-1 and I'll tell you if you need to go back to them and try again. There may be a redraw doc fee if you go back. I'm sure the L.O. was just as shocked as you. 770-255-3831.
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Terri Vellios, Agent, Campbell, CA
Sun Sep 27, 2009
You should have received a good faith estimate from your lender and they should have explained it to you. You have FHA which has higher fees and sometimes those can be financed into your loan, which result in a higher purchase amount. Those higher fees is insurance in the event of default. These are paid up front and monthly. Also the lender will require reserves in two forms; reserves in your bank account amounting to a number they feel would cover your bills for a certain amount of time, and the reserves which are paid up front at closing, these are; taxes, insurance, and home owners fees (if applicable). Those reserves can not be paid for by the Seller. These usually are the surprises that Buyers are faced with if the lender did not fully explain the fees to them.

Now that you walked away, hopefully you did not loose money.
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Michael Hamm…, Agent, Suwanee, GA
Sun Sep 27, 2009
I applaud you, Wessie, for your decision. Too many times, some lenders seem to have the attitude that once you have started the loan program with their company, it is a done deal. If at any time during the process, or within three days on a refinance in our state, you don't like what is happening, FIRE THEM! When you decide to do it again, please feel free to forward me (or many other good Realtors on Trulia) your email address and we will give you names and contact info for mortgage folks with whom we have worked and WILL do what they say, or I fire them. FWIW, we fired one of our three regulars last month. Good Luck!

Michael Hammond
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William M "M…, Agent, Suwanee, GA
Sun Sep 27, 2009
Did you not have a "Good Faith Estimate" from your loan officer? This should have been provided to you within the first three days after you made loan application. % with .75 origination fee is actually a pretty good deal for you. I'm confused as to why the loan amount changed. Can you shed some light on that for me?
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