After a long and tiring weekend of closing, moving and unpacking I finally have my wireless internet set up and I’m ready to get back to my personal finance blogging. I imagine most of my posts will be looking forward towards my financial future as a home owner, but first I want to post about the closing process and how the credit crisis effected my housing loan.
Previously I wrote about the effect of the government takeover of Fannie Mae and Freddie Mac on mortgage interest rates. My lender told me at that point that I had the option of locking in my interest rate at 6.0%. I declined to lock in the rate, as I thought the interest rates might drop lower. It was at this point that my lender at BancGroup went MIA. I constantly inquired about the current interest rate in order to make an informed decision about locking in my interest rate. I did not hear back from my lender about the interest rate until the day before I was supposed to close, when I was informed my rate would be 6.25%. Due to the lack or communication I was extremely unhappy with my lender, but it was too late to do anything about it.
Back in December when I first started looking at condos, I got pre-approved by BancGroup for a loan of $300,000. All I needed to do to get pre-approved was provide current assets for a down payment, my most recent pay stub and my planned down payment percentage, all of which was done over the phone.
As my closing date neared, the credit crisis started taking effect. About a month before my closing date, I faxed copies of my most recent pay stub and my most recent bank account statements. I even went so far as to provide the last statement from my CD to prove that the giant deposit on my most recent bank statement was in fact my money. I was told this was all that was necessary to ensure a loan.
Three days before my closing I was informed that my college diploma was needed, so I faxed over my diploma. Two days before my closing I was informed that I needed to provide proof that the earnest money checks came from my bank account. Also, I had to fax over a second bank account statement for each bank account. Additionally, I had to prove that I in fact closed my CD, despite the fact that I already sent over a statement that matched up very closely with the deposit into my checking account.
It was very aggravating to have to continually prove that I was worthy of a loan for the amount of about $220,000 when I was already approved for a $300,000 loan. It really shows how lax the lending criteria was in early 2008 and how strict it has become over the past few months. I can understand the extra scrutiny, however, I don’t understand why it had to be done last minute. It was very disconcerting to be preparing for a closing and not be 100% confident that I was going to be awarded a loan.
I asked my lender continuously beginning a month prior to closing for an estimate of the total closing costs. He estimated closing costs to be between $1,500 and $1,700. Also, he said he would be able to provide me a better estimate about 30 days prior to closing when he has all of the figures from the seller’s side. Not only did I not get a better estimate 30 days prior to closing, I did not get an estimate at all from my lender. I received no good faith estimate. I called the seller’s attorney and was able to get a copy of the Housing and Urban Development Settlement Statement (HUD) the day before closing. I then called my lender and he still did not have a copy of this HUD statement, which he needed to provide me a good faith estimate of what I needed to bring to the table at closing.
I find it totally unacceptable that I was able to get a copy of the HUD statement prior to my lender. Also, it is totally unacceptable that I did not receive a good faith estimate. Finally, it is absolutely wrong that I was made aware the sum of money that I had to bring to the closing one hour before my bank closes the day before closing. My closing was scheduled for half an hour after my bank opened the next day. Basically, I had a one and a half hour window to secure a certified check once I knew my final closing value, which is very nerve wracking.
Lastly, my lender totally left me out to dry with the final value of the closing costs. He never made it seem like the $1,700 to $1,500 range was only for the lender’s fees. It would have been nice to know that the closing costs also included fees to the title company and various miscellaneous fees, totalling over $4,000!!! The following are all fees that are included in my closing costs: funding fee, application fee, underwriting fee, property inspection fee, tax service fee, courier fee, processing fee, flood certification, closing/escrow fee, environmental lien protection endorsement, condominium blanket 1 endorsement, gap risk update, mortgage exemption certificate, record assignment of mortgage, state regulatory fee and for good measure another courier fee. If that isn’t the definition of nickel and diming you, I don’t know what is.
Maybe I was just naive about what was involved in closing and what to expect for the closing costs. I also think my lender could have helped out a bit more, I mean they should want my money, right? Hopefully, you all have learned from my story and will not experience the same nerve wracking and stressful closing experience that I did.