All Forum Posts by: Danny Shore

"When you receive a Good Faith Estimate, these are "estimates" of what your closing costs will be. The reason these are estimates, is the actual costs will vary slightly. There are several unknowns on a purchae transaction most of the time, but we try to get as close as possible, so the borrower is not "shocked" when it gets down too the nitty gritty. I have always tried to estimate a little bit to the high side, so the surprises are less apparent.

After the loan is approved, and you are getting near the closing, the settlement costs will be used from your Good Faith Estimate in a more precise manner. If the Good Faith Estimate were to be exact, then there would be no difference in closing costs and settlement costs. In reality, unless you are actually closing on the 15th of the month, there wil be slight differences. Actual homeowners insurance costs and property tax escrows will also cause the actual settlement costs to vary as well.

Settlement costs are the actual amounts being paid to different parties which have contributed to the mortgage traansaction. Appraisals, credit reports, title insurance, attorney's fees, recording fees, (some states transfer taxes), realtor fees for both the buyer and seller, mortgage payoff amounts to clear the lien to the home, homeowners insurance, closing agent fees, and oh yes, if there is anything left over, we brokers like to get paid as well, and the lender we send the loan to has to get their money, and flood certifications, surveyors, etc."

1. What are the unknowns?
2. What is the significance of the 15th of the month?

for #5, assume the rebate is a seller concession. does that rebate also reduce the basis in the same manner as lowering the purchase price by the same amount? (if it does, then why not just lower the purchase price rather than give a concession?)

What are the tax consequences for the following 100% residential rental situations?

1. seller paid closing costs
2. buyer paid closing costs
3. buyer tacks the closing costs onto his mortgage
4. what is the better scenario? having the seller pay $xxx or reducing the purchase price by that $xxx
5. what is a closing cost "rebate"

i assume for #1, the amount is capitalized (increases the tax basis) and depreciated over 27.5 years.

Thanks!

http://loanmodificationfoundation.com/2009/01/differences-between-refinancing-and-loan-modification/

in the "article" it says "Homeowners don’t have to pay the closing costs upfront because they just add them to the loan amount but [u] and it increases the overall interest you pay to the bank over time."

If the buyer capitalizes the closing costs, how exactly is he extending the loan term? I understand that a higher debt balance would lead to a higher effective interest rate but i do not understand how the loan term would change (unless the buyer opts for the same monthly payments before and after the capitalization of the closing costs)

i think if the main risk factor is that the housing price would drop far and effectively negate any rental income.

well, if we go by the 3x property-value-to-income ratio, that is a sustainable property value. If the house is priced at 9.75x ratio, then it is overvalued. I am interested what other risk factors such an investor would be exposed to if s/he only looked at the PITI ratio to calculate the rental income. For example, if the PITI is 3,000 and the rental income is 3,500 determined by the local market, what other risk factors come into play?

Does it make sense to buy an overpriced multifamily residential rental if the rental income can
cover the mortgage payments (inclusive of PITI)?

please be as critical as possible. :D

if i spend money to improve the property (for business purposes), are the garbage disposal fees in connection to the improvement considered a capital expenditure even though it does not "add to the value or useful life of property or adapts property to a new or different use"? My best guess would be yes.

1. Are mortgage rates based on the guarantors' credit score and/or the loan amount?
2. If the buyer increases the down payment on the property, does it decrease the mortgage interest rate?
3. What is the purpose of paying points if a buyer could simply increase the down payment, thus decreasing the interest paid over the life of the loan term?