| Goodfaith
At application, or within
3 business days of application, you will be presented
with a form called the Goodfaith Estimate. This document
provides answers to two of the most commonly asked questions.
How much money will I need and how much will I have
to pay monthly? Answers to these questions
can be found below.
1. How much money will I need?
The bottom left-hand side of the Goodfaith Estimate
calculates the down payment, adds closing cost and prepaid
expenses and totals everything next to "Total Est.
Funds to Close". Deposits or earnest money will
be deducted from this amount. Brief explanations of
these terms can be found below.
Down Payment
The down payment is the difference between the purchase
price and the loan amount. This amount is usually calculated
in 5% increments such as 0%, 5%, 10%, 15% and so on.
Closing Costs
These costs are outlined on lines 800 - 1320 and totaled
next to "Estimated Closing Costs" on the Goodfaith
Estimate. In general, closing costs are a component
of interest rates (the higher the costs the lower the
rate). In addition, closing costs are often paid by
the individual selling the home you are purchasing.
Prepaid Expenses
These expenditures are not considered a cost of doing
the loan and are outlined on lines 1001 - 1005 and totaled
next to "Estimated Prepaid Items/Reserves".
Prepaid expenses are items such as "interest to
first payment" and funds needed to establish an
Escrow Account.
The Goodfaith Estimate outlines everything you are
financially responsible for. It is common to have many
questions about this document. If you do, please don't
hesitate to ask.
2. How much will I have to
pay monthly?
The bottom right-hand side of the Goodfaith Estimate
outlines the "Total Monthly Payment". This
sum includes several monthly payments described below.
Principal & Interest
Principal is the amount paid monthly to reduce your
loan balance. Interest is the amount paid monthly to
borrow the funds. Although the principal and interest
payment is the same every month, the amount actually
paid varies. Ask you Palladium Mortgage Advisor for
an amortization schedule for more details.
Other Financing (P&I)
In some cases, the borrower will choose to have both
a first mortgage and second mortgage. This line item
shows the principal and interest for the second mortgage.
Hazard Insurance
Hazard insurance protects your home from fire and other
perils. Every month you pay the mortgage company 1/12
of your yearly hazard insurance premium which is held
in an escrow account. The mortgage company then pays
the entire yearly premium to the hazard insurance company
when it comes due.
Taxes
Every month you pay the mortgage company 1/12 of your
yearly taxes which is held in an escrow account. The
mortgage company then pays the entire yearly amount
to the county in which your home resides.
Mortgage Insurance
This premium is paid to a mortgage company to protect
them against foreclosures. Generally, mortgage insurance
is required when you have a down payment of less than
20% of the sales price. Ask you Palladium Mortgage Advisor
for details on how to eliminate mortgage insurance.
Homeowner Association Dues
Some communities require you to pay these dues. This
is paid directly to the association and not the mortgage
company.
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