Understanding the Truth in Lending (TIL) statement and the Good Faith Disclosures (GFE)

 

In just 6 minutes….I will quickly and concisely show how you can avoid being a victim of predatory lending practices and save you thousands of dollars in junk fees.

 

To get started .…Please click on the sample forms and begin printing the two PDF files titled featured at the top of the page. These forms are the Good Faith Estimate (GFE)…and Truth in Lending statement (TIL).

 

If possible please load legal size paper into your printer.

 

All lenders and brokers are required to provide borrowers with both of these federally mandated disclosures… within three days of application.

 

 

In order to get the BEST PRICE FOR SERVICES AND THE LOWEST POSSIBLE RATE …YOU MUST REQUIRE THE LENDER PROVIDE YOU WITH THESE DISCLOSURES …BEFORE YOU APPLY FOR THE LOAN or allow a lender to access your credit report.

 

Let’s examine the Good Faith Estimate.

 

In this example …. we  use the typical $500k loan and purchase price of $600k.

 

 

Each line below is numbered and references a dollar figure

which represents the going rate as of services as of this writing in the fall of '08.

 

Many fees are paid to “outside third parties” cannot be avoided …. But others are simply junk fees used to boost the your lenders bottom line.

 

Let’s go through the lines that have the potential to be exploited.

 

Starting with lines is 800 thru 812

 

Line # 801 Origination fee

 

The quote “origination” fee…is typically 1%

of the loan amount..in this case $5,000.

 

It’s known in the industry as “1 point.”

 

Essentially this is a commission ….paid to your bank, or your broker to procure the loan…from the wholesale funding source.

 

Those wholesale sources are (usually) Fannie Mae and Freddie Mac.. and neither grant loans directly to the public.

 

Rarely should a borrower pay more than 1 percentage point.

 

The “points” paid …..on a “purchase” transaction…..are deductible in the same tax year….and can be used to off set other income …thereby lowering your over all tax bill.

 

(If you are refinancing your a home..then the “points” must be amortized and deducted over a 30 year period.)

 

Line 802 Loan Discount Points

 

If a borrower needs to “buy down” the starting interest rate to a lower rate or to “qualify for the loan” this can be a legitimate cost…however ….it will take 4.5 years of lower payments to offset “1 point” paid in advance to lower the long term interest rate.

 

It is usually in the buyers best favor..to pay a slightly higher interest rate and get zero point loan.

 

Line #803 Appraisal fee

 

The typical fee is $400 and is paid to a licensed .… independent …. third party appraiser.

 

If you have paid for the appraisal in advance - directly out of your pocket - you are entitled to a copy at the time of completion.

 

Appraisals are valid for 90 days from the date of completion.

Currently all appraisers are requiring payment in advance or a credit card guarantee…before the appraisal is scheduled.

 

Line # 804 Credit Report

 

A credit report is valid for 60 days and costs $20…your broker/lender should provide you with a copy..although they not required by law to do so.                          

 

 

Line # 805   Lender Inspection Fee

 

In the era of the tight credit some lenders are requiring an additional quote “drive by appraisal” to re-certify value.

 

The typical cost is $100-$150.

 

Line # 808     Mortgage Broker Fee

 

If your broker is charging you an origination fee..AND the the mortgage broker fee …this a TOTAL JUNK FEE.

 

Refuse to pay this additional junk fee.

 

Line # 809     Tax Related Service Fee

 

This fee is charged by an independent contactor ..that the lender employs ….to annually verify property tax payments by the homeowner.

 

 

Line # 811     Underwriting Fee / Document fee

 

These two fees should not total more than $700.

 

Line # 812   Wire Transfer Fee

 

This fee is banking service fee paid to a wire service for transferring funds between escrow and the lender. 

 

The typical fee is $95

 

Line 1100 -1108     Title and Escrow fees Charges

 

Here’s where the typical buyer’s is overcharged $2000-$3,000 on every transaction

 

Typically the listing agent demands the right to choose both escrow and title insurance carrier.

 

Typically both the escrow and the title are company chosen only ….because they are in- house services for the listing agent’s brokerage.

 

Meaning they will charge he highest fees possible and act as if those fees are the norm unless you make them “compete”.

 

If you haven’t logged on to my pages: title and escrow  please do so at the end of this exercise.

http://www.ocfsbo.com/title-insurance.html

 

http://www.ocfsbo.com/escrow.html (please note that this page may load slightly slower due to the PDF file that illustrates the entire escrow process).

 

To get the lowest price for services you will need the help of your “buyer’s agent/broker”…don’t rely on the listing agent...they are being compensate in some form or another to direct business to the “in house providers”.

 

If you haven’t logged on to my page buyer’s broker page please do so at the end of this exercise.

 

 http://www.ocfsbo.com/buyersbroker.html..pleease

 

These prices may they may be the “norm” but you can negotiate lower prices IF you do it before you complete the negotiations.

 

There’s no competition here….unless you start with the as part of your purchase offer.

 

Write into your offer conditional that the listing (i.e. bank’s) agent can choose title but their choice of escrow and title must agree to match any reasonable estimate your agent procures in writing.

 

 

Line 1200 -1203  Government Recording Fees

 

These are actual costs charged by your local state and county government

 

Line 1300   Pest and/or Property Inspections

 

Once a property is foreclosed upon by the bank…the rules for disclosure of construction and property defects change drastically.

 

The bank simply does not have the same responsibilities as a seller who resides in the property.

 

It is in the banks best interest to sell the property “as is”.

 

If the bank has made repairs they are typically the cheapest and quickest possible.

 

You protect yourself by obtaining a home inspection from a independent third part inspector. Do not accept a referral from the listing agent …as they will refer you to someone to wants to please that agent as well as the bank in order o get future referrals.

 

If you haven’t logged on to my pages: “home warranty” please do so at the end of this exercise.

 

http://www.ocfsbo.com/homewarranty.html

 

IN CLOSING

 

Buying a bank owned home can have advantages:

 

1) Price

 

2) Customized Repairs

 

But a buyer must exercise extreme caution in order to avoid being sold a home that can hide thousands of dollars in hidden repairs.