The Appraisal - What is an appraisal and why do I need one?
The appraisal of the property being purchased is one of the most misunderstood facets of the buying process. Typical questions asked about the appraisal process are answered for your below.
Before the lender will make a loan on a property, an estimate of value is required. It is common for lenders to require that appraisals conform to the Uniform Standards of Professional Appraisal Practice. This is done so that consistent, detailed information is provided on all appraisals providing for protection for both the bank's and the buyer's investments.
The Appraisal provides an estimate of the value of the property. The information in the appraisal is necessary to evaluate whether or not the property is adequate security for the loan. An appraisal is a report made by a qualified person setting forth an opinion or estimate of value. An independent appraiser inspects the property, neighborhood and at least three other properties of comparable size and style.
The Appraisal - What does it cost?
The fee for a standard residential appraisal is generally a standard fee for a given geographic area. If the subject property is valued at $500,000 or above, the cost may be more. In addition, some investors may require more than one appraisal. If a government mortgage (FHA or VA) is being used, the fee is regulated by the governing agencies. Typically appraisals range from $350 to $500.
The Appraisal - Can I get a copy of the appraisal?
You are entitled to a copy of the appraisal... after all, you paid for it! As a service to my clients, I will provide a copy of the appraisal at closing. If there are any issues as to value or issues about the structure, we will inform you as soon as we know there are any issues.
The Appraisal - When will it be done?
Immediately after loan application and after receipt of the Real Estate Contract, Pulaski Bank will order an appraisal of the property. The appraisal is required because so many contracts are subject to the home appraising from the sales price. It will generally be completed within seven to ten days. The appraisal is submitted with the loan package for final review by the underwriter.
The Basics for Qualifying - Housing Debt
28% Housing Debt
The Fannie Mae / Freddie Mac guidelines say that no more than 28% of your gross monthly income should go towards your housing payment (sometimes called the front end ratio).
The Basics for Qualifying - Total Debt
36% Total Debt
The Fannie Mae / Freddie Mac guidelines say that no more than 36% of your gross monthly income should go towards all of your debt, including housing, plus car loans, installment loans, credit cards, etc.
The Closing - Settlement and Closing
We are in the final stages to be able to close your loan and there are some last steps that Pulaski Bank must complete before documents and funding can be ordered.
These items are:
By now, you should have decided on your homeowner's insurance policy. If not, you need to make that decision quickly. Your insurance agent should call to exchange some mutual information about the insurance policy and mortgage loan.
Pulaski Bank will order the survey and co-ordinate the appropriate delivery of title work and loan documents for your closing. Pulaski Bank will be scheduling your closing, so please call us to coordinate a time convenient for you.
Final numbers for closing will be prepared by the either Pulaski Bank or the Title Company. The closing agent typically has the settlement numbers (the HUD-1) prepared about 24 hours in advance, as they must wait for all of the documentation to come to their office from the seller, lender, title companies, etc. [The HUD-1 translates the terms of your sales contract and mortgage commitment into numbers and acts as a balance sheet for an accounting between buyer and seller].
You may be asked to present your driver's license for notary purposes so please bring them.
If you know of any changes to your closing date or if there are two borrowers and only one can attend, please call us ASAP. We will need plan around those changes.
Escrow Accounts
It is typical that when a borrower makes his house payment that it includes principal, interest, taxes and insurance [PITI]. When you make your monthly house payment [PITI], we will keep an account of your money to pay Real Estate Taxes and Home Owner's Insurance when they become due.
Each year, about February or March, your lender will review your account to show that status of the payments, the balance in the account, and the anticipated cushion. If adjustments need to be made to the account, this is when you will be notified.
What Expenses Will I Have?
The money that you will have to spend and when you have to pay varies from loan to loan. Some items, like Earnest Money (EMD) is dependent upon the Real Estate Contract. Typical expenses are:
Application Fee: $410
The Application fee is paid to Pulaski Bank for Conventional Loan. It covers some of the expenses associated with obtaining a loan, such as credit reports, appraisals. When you sign a RE contract, you commit to have all of your application fees to the Lender and should be paid ASAP to meet the requirements of the RE contract.
FHA Appraisal Fee: $450
An FHA appraisal requires not only the comparison of value, but HUD wants to make certain that the home to be purchased meets certain safety and structural standards. An FHA apprasial is more detailed than a Conventional Loan Appraisal. However, an FHA Borrower should be aware that the appraisal does not take the place of a "whole house" inspection that a home buyer should be encouraged to order.
Earnest Money Deposit: Varies
As part of the negotiations for a home purchase, as a buyer, you will give an Earnest Money Check [EMD] as part of your good faith to purchase a seller's home. The EMD can be given to a builder, title company or Listing Company's escrow account.
Commitment Fees: Varies
Commitment fees are collected for various loans. A commitment fee may be required when locking your loan for an extended period of time or when loan approval is issued for a build job. A commitment fee may or may not be refundable and this should be discussed when reviewing you loan expenses.
Termite Inspection: $50
A pest inspection is usually required on a Conventional loan and always necessary for a Government loan.
Whole House Inspection: $315
While not required, "buyer beware' is the best advice. Your Realtor can offer the name of several Companies that can inspect heating & air conditioning, electrical, plumbing, etc.
Environmental
You may want or your company's relocation department may require you to have certain environmental inspections made. Ask your Realtor for guidance in this area.
Radon: $100
Septic Systems: $100
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