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Originally posted by Porsche-O-Phile
Some stupid questions:
1. Can you use a mortgage to consolidate/eliminate other debt? In other words, could I take out say a $350,000 loan on a $300,000 place and use $50,000 to wipe out a bunch of other debt like credit cards, car loans, etc. or possibly invest? Bad idea? Is it even allowed? Obviously if we could do that and be left with a mortgage and a student loan payment and that's it, it'd simplify the hell out of things and be a lot better interest-rate wise.
2. If you get "pre-approved" for something, what does that mean exactly? How long is it good for?
3. Who are some of the better (or worse) lenders that people have dealt with? Realtors?
I'm sure I'll have more. Sorry for the long post but I figure I might as well take advantage of this time while I'm sitting around waiting for the market to correct/crash and actually learn how this stuff works so when the light turns green I can just "go", rather than trying to futz around figuring all this stuff out. . .
TIA guys.
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A couple of things before you proceed. Look at the Good Faith Estimate
Note the following - in terms of "closing costs" - in reality the only real fees that are in control of the person writing the loan are as follows:
Origination fee
Discount fee - (this may or may not be real)
Broker fee
application fee
processing fee
admin fee
These fee lines are what the person originating the loan can use to break apart profit - meaning, although they have different names, they all are payable to the same person, therefore are all in the same. These fees are what is needed to be watched.
The other costs that ARE NOT PAYABLE to the person writing the loan, are in fact fixed third party costs which MUST be paid - these are the costs for making the loan legal, and collectable in the event you don't pay. For example:
underwriting fee
recording fees
Title fee
escrow fee
appraisal fee
various county, notary, attorney (depending on state) and tax fees
anything listed under "reserves deposited with lender"
These fees represent real costs that are REQURIED to close the loan.
Underwriting fee is a fee that's payable to the lender for granting the loan.
recording fees are what your local county recording office requires to note in the books that you have a new home under your name or a loan under your name
title fees are what the title company charges to research your legal history - this is required by the lender to prove that you in fact, have no legal obligations (judgements, garnishments, back taxes) that could cause the house to be reposessed while under your ownership. If athe bank grants you a loan, and you have a legal obligation to pay someone, the home you just bought can be taken away and used to pay off your creditors, screwing the bank - so, this is a guarantee that you are "clean" and no higher legal entity (such as the IRS) can take your home away
escrow fee this is an independent party that represents neither you or the bank. They are in charge of trading the banks money for that signed document agreeing you'll pay the bank back for the home you just bought. They are a neutral 3rd party. Requried by federal law to ensure the bank doesn't screw you or you screw the bank.
appraisal fee - a state certified inspector who guarantees the value of the home you're buying - also verifies to the bank that the property does in fact exist and is in marketable condition - he needs to be paid as well.
various county, notary and attorney fees - any other required costs depending on what your local county charges for owning a home.
reserves deposited with lender - when you have your taxes and insurance rolled into your monthly payments - meaning the bank pays your taxes and insurance out of your monthly payments, they collect anywhere from 2 - 12 months worth of taxes and insurance in advance, so when you make your payments, you're always ahead of what you owe. If your property taxes go up, then they have the slack to cover it.
THAT IS NOT CONSIDERED CLOSING COSTS- those are for your taxes and insurance, you can get it back if you ask for it.
EDIT: remember that it is also illegal for someone to mark up and make profit off of a fee that isn't rightfully theirs. So you do not need to worry if you are paying inflated title, escrow, appraisal fees, etc.
Example would be myself the loan officer charging you the borrower $500 for an appraisal that was only $400 - I could not keep the difference. That is illegal.
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