Prepaid finance charges at closing - CONFUSED

What did your loan officer say?

If they costs on the loan are too high and keep going up don't sign on the loan. 

It sound like things haven't been explained well.  You didn't mention your purchase price but $2,000 seems quite low and $7,000 seems quite high.  In CA, anyway, the lenders estimated cost for 3rd party charges are often off quite a bit.

Keep in mind that they gave you an estimate, and only an estimate.  Best of luck!

Hi, welcome to Active Rain! I hope to see more of your blogs in the future. Learn from others, share your knowledge and experiences and enjoy yourself! Take care! ---Kirk.

Lisa, I will try to help clarify things a bit but it is still difficult without seeing the GFE and you should speak with your loan officer. The pre-paid reserves are for your hazard insurance and taxes and that amount depends on when your taxes and hazard premium are due. That also may include the upfront payment of your first years hazard insurance. Those are solid items that you would have to pay even if you owned the home free and clear. The estimated settlement charges are all of the fees for the loan (the lender's fees, broker's fee if you are using one, the title and escrow fees, etc.).  Those are basically the cost of doing the loan. The pre-paid finance charges are simply all of the fees that are included in the calculation of the Annual Percentage Rate (APR) and that will show on your Truth-in-Lending (TIL) disclosure. In other words, because those fees are "rolled" into the loan, it effects your actualinterest rate. Included in that total is the VA funding fee (which is a large portion of that figure).  You won't actually bring all of that money to closing, most of it will be included in your loan amount.

The figure that you want to look at for the amount that you need to bring to closing should be worded at the very bottom as something like "total est. funds needed to close". Please be aware that this figure will most likely change MANY times throughout the loan process but should be close to what it was on your original GFE if you have a good loan officer/broker. Sometimes things change drastically though and the borrower does have to come in with quite a bit more money than they anticipate. Each loan is different.

I hope this has helped and not confused you more!  Please contact your loan officer when she gets back from vacation. Remember, all of the figures are just ESTIMATES at this time. I commend you on your thought process of seeking out education rather than panicing and canceling the loan. You seem to be very level-headed.

Libby

Lisa, It is confusing..even for agents sometimes. We typically tell our folks to count on at least 3% of the purchase price set aside for closing costs. If the seller pays for some it could be less and on the rare occasion it could be more. But that is a good round amount to count on no matter what type of loan it is. Because it is VA are you doing a 100% or at least putting down some $$ It all adds up. The biggest thing is to get together with your husband and estimate your TYPICAL monthly bills INCLUDING the estimated mortgage/tax/insurance IE: utilities, gas groceries. If the mortgage is more than 1/4 of your take home pay then bottom line..you've got more home than you can afford.

Good luck and welcome

Welcome to Active Rain. I Hope you will enjoy it and learn from it as much as I do. Look forward to more of your bloggs.

Good luck with your home and the closing cost. I hope all works out for you.

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