DEAR JENNY: What are Closing Costs?

There are so many different charges involved in buying a home, it is important to know what to expect at the settlement. Your lender is required to give you a Good Faith Estimate (GFE) of your settlement costs within three business days of your loan application. Once you get it, review the charges below to avoid any surprises when you sit down to close on your loan.

1. Fees to get a mortgage

This includes lender fees and points, as well as a host of other charges involved in obtaining and processing your loan. Points are an upfront charge expressed as a percent of the loan amount (e.g., 1 point is 1 percent of the loan) to increase the lender's effective yield on a loan.

Specific lender fees can include:

• Loan Origination Fee - This is a charge for your lender's work in evaluating and preparing your mortgage loan.
• Application Fee – This charge covers the initial costs of processing your loan application and obtaining your credit report.
• Appraisal Fee – Your lender will need an opinion from an independent appraiser of the market value of the home you wish to purchase.
• Survey – This fee goes to a surveying firm who will verify that your lot has not been encroached upon by any structures since the last survey conducted on the property and to ensure that the home and other structures and legally where the seller says they are.
• Mortgage Insurance – A lender may require this type of insurance for buyers who make a down payment of less than 20 percent of the value of the house. The policy covers the lender's risk in the event the buyer fails to make the loan payments. Premiums are typically paid annually from an escrow or reserve account, or in a lump sum at closing.
• Homeowner's Insurance – Insurance that protects property against loss caused by fire, some natural causes, vandalism, etc., depending on the terms of the policy. Also includes coverage such as personal liability and theft away from home. Your lender will expect you to have a policy in effect by closing.

2. Fees to establish and transfer ownership of the property

Your lending institution is not likely to give you a loan on a house unless you can prove that the seller owns the property you want to buy. This is where title search and title insurance fees come into play. A title agent will verify that the seller is, indeed, the owner of the property and issue a title insurance policy to guard the lender against any errors that could have occurred in the searching process. The cost of the policy is usually based on the loan amount. There may also be attorney, escrow, courier fees and other charges involved in the settlement process.

3. Fees to state and local governments

These fees include transfer, recordation and property taxes collected by local and state governments. Your taxes based on the assessed value of the home, which you pay for community services such as schools, public works, and other costs of local government. Taxes can often be paid as a part of your monthly mortgage payment.

DEAR JENNY: What is the difference between interest rate and A.P.R.?

You'll see an interest rate and an Annual Percentage Rate (A.P.R.) for each mortgage loan you see advertised. The easy answer to "why" is that federal law requires the lender to tell you both.

The A.P.R. is a tool for comparing different loans, which will include different interest rates but also different points and other terms. The A.P.R. is designed to represent the "true cost of a loan" to the borrower, expressed in the form of a yearly rate. This way, lenders can't "hide" fees and upfront costs behind low advertised rates.

While it's designed to make it easier to compare loans, it's sometimes confusing because the A.P.R. includes some, but not all, of the various fees and insurance premiums that accompany a mortgage. And since the federal law that requires lenders to disclose the A.P.R. does not clearly define what goes into the calculation, A.P.R.s can vary from lender to lender and loan to loan.

The A.P.R. on a loan tied to a market index, like a 5/1 ARM, assumes the market index will never change. But ARMs were invented because the market index changes and makes fixed rate loans cheaper or more expensive to make -- that's why they're variable rate in the first placed!

So, A.P.R.s are at best inexact. The lesson is that A.P.R. can be a guide, but you need a mortgage professional to help you find the truly best loan for you.

Note when you're browsing for loan terms that the A.P.R. will not tell you about balloon payments or prepayment penalties, or how long your rate is locked. Also, you'll see that A.P.R.s on 15-year loans will carry a higher relative rate due to the fact that points are amortized over a shorter period of time.

Why you should get a home inspection

Whether you are buying or selling a home, you should have a professional home inspection performed. A home inspection will look at the systems that make up the building such as:

• Structural elements, foundation, framing etc.
• Plumbing systems
• Roofing
• Electrical systems
• Cosmetic condition, paint, siding etc.

If you are buying a home, you need to know exactly what you are getting. A home inspection, performed by a professional home inspector, will reveal any hidden problems with the home so that they may be addressed BEFORE the deal is closed. You should require an inspection at the time you make a formal offer. Make sure the contract has an inspection contingency. Then, hire your own inspector and pay close attention to the inspection report. If you aren't comfortable with what he finds, you should back away from the deal.

Likewise, if you are selling a home, you want to know about such potential hidden problems before your house goes on the market. Almost all contracts include the condition that the contract is contingent upon completion of a satisfactory inspection. And most buyers are going to insist that the inspection be a professional home inspection, usually by an inspector they hire. If the buyer's inspector finds a problem, it can cause the buyer to get cold feet and the deal can often fall through. At best, surprise problems uncovered by the buyer's inspector will cause delays in closing, and usually you will have to pay for repairs at the last minute, or take a lower price on your home.

It's better to pay for your own inspection before putting your home on the market. Find out about any hidden problems and correct them in advance. Otherwise, you can count on the buyer's inspector finding them, at the worst possible time.

Tarrant County: Homebuyer Financial Assistance for First Time Homebuyers

As a leader in the effort to make quality, affordable housing accessible to all, Tarrant County Housing Partnership administers a number of programs that provide down payment, closing cost or principle reduction assistance for low and moderate income individuals and families.

Each program varies: in some instances, assistance is only available for specific properties, in other instances, assistance is open to homebuyers in specific communities. A brief overview of each program’s key components and eligibility requirements follows.

Important note: You must at least attend a TCHP Orientation Class in order to be considered for assistance. Attending TCHP’s other homeowner classes is strongly encouraged, and in some instances, may be required in order to receive your funding. Your counselor can provide additional information. View a class schedule.

Arlington Homebuyer Assistance Program (AHAP)

• For first-time homebuyers purchasing a home in Arlington only.

• This program provides up to $7,500 in down payment/closing cost assistance. Up to $10,000 of assistance is available for qualified Social Security Income recipents OR for purchase of properties located in the NSRA target area.

• The home purchased must meet minimum property standards.

Development Corporation of Tarrant County (DCTC)

• This program provides up to $14,999 in down payment/closing cost assistance and principle reduction for first-time homebuyers who are purchasing DCTC-owned properties, which are located throughout Tarrant County.

To learn more about these programs, contact Jenny or visit http://www.tchp.net/programs_services/financialassistance.html

JENNY'S TIPS: How to Get Your Loan Faster

Five ways to make the loan process go faster

We should say that "working with us" is the first way!  When you let us help you find the loan that's right for you, you truly are taking advantage of some of the area's best technology and expertise to get you a loan decision and funding on your loan quickly.  But here are five "other" ways you can speed up the process of getting a mortgage loan:

1. Have everything ready and in one place.  

You'll find a list of things you might need in support of your mortgage application by clicking here.  If you get them all together and keep them in a safe, portable place like a special pouch or folder, you can cut down on time spent rooting around for things we may need.  Also, you'll help cut down on your own anxiety and confusion.

2. Be honest and complete when you fill out your application. 

"Fudging" your employment or residence history or omitting open credit accounts you'd rather not have considered doesn't increase your chances of getting a favorable loan.  In 100 percent of cases, it makes it harder, and take longer.

3. Respond promptly to requests for additional information.  

During processing, we or the lender considering your loan may need additional information.  Provide it as soon as you get the request, or return the call as soon as you get the message.

4. Be prepared to explain derogatory items in your credit report.  

This is really part of number 2 above.  If you had an illness or a divorce where you missed or made late payments, or you have other instances of late payments or delinquencies on your credit report, be prepared to explain them.  Be honest, and don't be nervous! The loan processor isn't judging you, they're trying to fill in all the blanks in their paperwork.

5. Let the appraiser in!  

The appraisal is one of the lengthiest parts of the mortgage loan process.  Studies have shown that the single biggest factor in appraisal "lag time" is the appraiser's inability to reach the homeowner to make an appointment.  If you're refinancing and the appraiser calls to make an appointment, make it as soon as convenient for both of you.

And remember that the appraiser doesn't want to buy your house.  He or she will say what the house is worth clean and tidy and in reasonable repair, even if you have some dirty laundry on the laundry room floor or dirty dishes in the sink.  Cleaning doesn't get you a higher appraisal!  Letting the appraiser in as soon as possible gets you a loan faster, though.