All of the closing costs displayed in our scenarios are estimates and are “3rd Party” fees; JVM does not charge you directly for our services (unless you pay points for the rate). “3rd Party” fees include items such as Title Insurance, Escrow Fees, Appraisal Fees, etc. that are charged by entities other than ourselves; we have no control over 3rd party fees and they will be the same no matter what lender you use. Some lenders only show “loan related” closing costs in their good faith or closing cost estimates, and this often misleads borrowers to think closing costs are lower than they actually are. We tend to overstate closing costs to ensure there are no surprises. But again, the fees are not ours, unless there are points charged.
Likewise, our “Prepaid Costs” are estimates too, and can vary tremendously depending on what time of the year (property taxes) you close or what time of the month (interest) you close. We included a conservative estimate for prepaid interest based on a close of escrow date at the beginning of the month, but this figure may be lower if you close in the middle or end of the month.
Hazard Insurance is another prepaid cost we simply estimate but have no control over. You will shop for your own hazard insurance, and the fee can vary depending on the amount of coverage you obtain. If you are looking to buy a Condo, you only need “walls in” hazard insurance, and we estimate that at $35 per month.
HELOC (Home Equity Line of Credit)
A HELOC is an adjustable rate mortgage which sits in second position behind the first loan. Years 1-10 of the HELOC are the “draw period” with a minimum of interest only payments. Years 11-30 are the repayment period where you make fully amortized payments. Rates are tied to prime, with an 18% life cap on the loan. There is a $75 annual maintenance fee and no early termination fee.
The payment in our scenarios is reflective of the interest only payment, as the vast majority of clients pay off the HELOC before it reaches the fully amortized stage.
“First Loan P&I” = Principal and Interest
“MIP” (FHA Only) = Monthly Mortgage Insurance Premium
“PMI” (Conventional Only) = Private Mortgage Insurance, expressed as monthly payment.
“Upfront MIP” (FHA Only) = Single Mortgage Insurance Premium paid at inception of loan – we assume it is financed or added into the loan amount for our scenarios.
“APR” = Annual Percentage Rate. It is a recalculation of your effective interest rate by taking into account closing costs as if they were “interest”. It includes closing costs such as PMI, MI, Origination Fees, Junk Fees, etc. In scenarios like the one set out below with No Points and No Fees, however, the APR should be approximately the same with all lenders as long as the actual “note rate” is the same.