Pittsburgh Mortgage and Real Estate Blog

When you finance a conventional mortgage with Jerry Pounds at Chase Home Loan’s office in Pittsburgh. Jerry will keep the numbers simple as he explains the three areas of cost in purchasing a home. Let us talk about the three areas of cost:

1. The down payment.
A potential client could literally put down 0% of the sales price or put down 100% of the sales price (ie paying cash). If you pay cash then you obviously will not need my services, unless you would like me to provide you with a low rate, no closing cost home equity line post closing. At Chase Home Loans we will typically look at down payments as little as 0% down, 3% down, and then we typically go in increments of 5%.

So just to recap you can put down 0%, 3%, 5%, 10%, 20% and so on with Jerry Pounds at Chase Home Loans.

2. Closing costs.
I explain closing costs very simply to all of my clients. Any time the lender, closing agency, or municipality where you close takes action on your loan, you are charged for it. Closing cost are these number on a good faith estimate from 800-899, 1100-1199, and 1200-1299. For example at Chase Home Loans our closing costs are as follows.

The fees that will appear in the 800-899 range are: a $395 application fee (which covers the appraisal and credit report - this fee must always be paid in advance before your loan can be processed. Then we have a $300 processing fee - this fee is for the work that my processor, Kenya Bradley does in getting your loan documented and coordinated for closing. Processing is the hardest job in the mortgage industry so remember to always thank your processor for their hard work. Chase also charges a $200 underwriting fee, BUT I always refund this to my clients on their Good Faith Estimates/Cost Sheets. We have a $84 tax service fee. This is a fee for Chase to monitor and maintain your timely payments of your tax and homeowners bills from your escrow account or out of you pocket. Lastly we have a $14 flood certification fee. No matter where you live (on a hill, the top of a skyscraper, etc) - we check to see if your new property is located in a flood zone. Sounds silly for most, but if you are found to be in a flood zone then you must acquire flood insurance. It can be costly so be prepared. Once your loan passes all of these phases we are getting ready for closing.

Now your loan is in the title company’s hands to prepare your docs for closing. The fees that will appear in the 1100-1199 range with a quote from Jerry Pounds are as follows: a notary fee of $35 is charged to notarize your loan documents, Ahh, title insurance, title insurance is paid based on a chart mandated by the state of Pennsylvania. Part of the title insurance is lenders coverage and part is owners coverage. Title insurance is determined by entering your sales price on a purchase or your loan amount on a refinance into http://www.alphaadv.net/patitle/ratecalc.html.

The usefulness of title insurance is to protect you and the lender in the case that the title examiner missed a lien or a the jurisdiction was delayed in getting a valid lien placed before your purchase. If some lien holder would come and lay claim to their rightful lien. You and the lender simply contact your title insurer and they will work to resolve the issue at no cost to you - other than your initial investment made at closing. (Here is a helpful hint: if you purchase a new home ask your agent to get the sellers old title insurance policy so you can receive a discount. If you are refinancing you can get even more discounts depending on how long you have been in your home. Your title policy endorsement is next and it cost typically $150 dollars. (If you buy a condo or opt for an Adjustable Rate Mortgage (ARM) then additional endorsements may be required at $50 a piece.) A $35 closing service letter is charged by the title company to the lender saying they warrant the quality of their work. If there are any mistakes made before or after closing the title company agrees to remedy these mistakes. My favorite new fee is the $50 E Doc fee. This used to called the courier or fedex fee but times have changed and now we email your documents to the title agent for closing. This fee covers the costs of goods like ink and paper, but also covers the necessary maintenance to keep your information secure.

Now you have closed. Any fees appearing in the 1200-1299 block are considered post closing fees. The only post closing fee you will incur with Jerry Pounds at Chase Home Loans is a recording fee paid to the county where your home is located. Most counties charge per page on how many pages need recorded. A good estimate of this fee is $130. This fee covers the actual recording in the deed books that you now are the owner of this home. On a purchase where you are unrelated to the seller there is the ever present transfer tax. This tax is paid to the state and municipality where the home is located. This total fee usually ranges from 2% to 4% of your purchase price. In most instances this fee is split 50/50 between you and the seller. So you exposure would be 1% to 2% determined by the area of Pittsburgh in which you purchase your new home. This tax is paid to the state and municipality where the home is located.

3. Escrows/Prepaids.
Any fees that show up on your HUD 1 settlement statement or your good faith estimate ranging between 900-999 and 1000-1099 are the ever confusing prepaids. The first fee appearing in the 900 block are Interim Interest. You will notice that almost all closings are scheduled toward the end of any particular month. The reasoning behind this is to save per diem interest. Yes, you must pay a per diem interest from the day of your closing until the first day of the next month. The per diem in calculated with your mortgage term (120-480 months) and your locked in rate. The next fee is homeowners insurance that must be paid for one year from the date of your closing. Homeowners Insurance is vital in case anything happens to your home, like robbery, fire, flood, landslide, etc. So we insure that you are protected from day one.

Now the dreaded 1000-1099 section. This is the reserves section of your closing statement. The first will be two months for homeowners insurance. So whatever quote you have received from your insurance agency we simply divide that by twelve and collect two times that amount. The reasoning behind this is to protect you from a possible increase in your homeowners insurance annual coverage. If your premium increases we will have enough in reserve to cover the cost without needing to request it from you. The final fee that will appear here is for real estate taxes. We escrow taxes for county, school, and municipality based on the total tax bill prorated as to when the tax bill is due. Here is the confusing part! These taxes are all due at different times during the year and if you are purchasing a new home you have to reimburse the seller for what they may have already paid. So when you see this number from Jerry Pounds at Chase Home Loans you will see 12 months always escrowed on a purchase. This is a very conservative and worse case scenario to show you your potential escrows on your new purchase. Finally rounding out your prepaids is actually a credit to you called an aggregate adjustment. I think the Pythagorean theorem was used to make this calculation. The long and short of the aggregate adjustment is that it was determined that lenders were earning interest off of the escrow accounts being held. So it was decided to give you an adjustment that would be comparable to what is earned in interest.

My intention was to describe the three areas of cost: down payment, closing costs, and escrows/prepaids in laymen terms to give you an explanation and try my best not to confuse you on your financing with Jerry Pounds with Chase Home Loans in Pittsburgh’s new Southside works.

Thank You,

Jerry Pounds
www.jerrypounds.com
412.432.7941
jerry.f.pounds@jpmchase.com