Mortgage settlement or mortgage closing can be confusing because several people, documents and fees are involved in preparing it. But with ample familiarity with the process, preparing a mortgage settlement statement can be done without any hassle or pressure brought by the components involved and the legalities that accompany them. People associate settlement title costs with mortgage loan charges and these vary, so it pays to shop around for the best combination. Here are the few basic steps in preparing for your mortgage transaction:
- Obtain copies of your recent credit reports from all of the three national credit reporting bureaus. They can provide free copies of your annual credit report that you can examine, review and check for any discrepancies or errors.
- Prepare all the supporting documents of the rent, mortgage and bill payments.The lender may ask for copies of your bank statements or cancelled checks (for a 6-12 month period).
- Collect other documents that your lender might need. Most lenders and brokers wants an original document so give it at least two months of preparation time to produce the following:
- Application fee (estimated cost: $75 to $300, including the cost of the credit report for each applicant)
- Loan origination fee (estimated cost: 1% to 1.5% of the loan amount)
- Points (estimated cost: 0% to 3% of the loan amount)
- Appraisal fee (estimated cost: $300 to $700)
- Lender-required home inspection fees (estimated costs: $175 to $350)
- Prepaid interest (estimated cost: depends on the loan amount, the interest rate, and the number of days for which the interest must be paid; for example, a loan of $120,000 with 6% interest for 15 days, $300; a loan of $142,500 with 6% interest for 15 days, about $356)
- Private Mortgage Insurance, PMI (estimated cost: 0.5% to 1.5% of the loan amount to pre-pay for the first year)
- Homeowner’s insurance (estimated cost: $300 to $1,000 depending on the value of the home and the amount of coverage)
- Flood determination fee (estimated cost: $350 to $2,800 added to homeowner's insurance. It may also depend on property value and location.)
- Escrow funds (or reserve funds) Some lenders would require you to set aside some money in an escrow fund account to pay for homeowner’s insurance, flood insurance (if you need it) and property taxes. Lenders use these escrow funds to ensure that these items are paid in a timely manner to protect their interest in your home.
- Prepare to prove your income or money source. Deposit the money that you will use into some kind of savings or investment account. Let it remain there for two to three months while mortgage is being processed for documentation purposes.
- As an added measure, you can compile your previous account statements from your other accounts, including your retirement, savings and checking accounts, annuities, CDs, and your life insurance policies’ cash values. It is important to be prepared when dealing with mortgages and a surefire way is by taking time in gathering these financial and legal documents.
Buying or selling your home can be one of the most life-changing decisions that you make. Being familiar and aware of the items involved in real estate process is essential, and working with trustworthy and communicative real estate professionals is important. Feel free to ask them questions about charges, fees or other issues.