Hello – I’m trying to prepare for closing which is supposed to happen in 3 days but nobody at NACA or Escrow are able to tell me yet what the are the total funds I will need at closing. They have referred me to the GFE as an estimate but that is about $7K more than what we originally had on my MFR.
Can anyone tell me if the GFE amount is in fact close to the amount I will need at closing? I need to prepare for this especially since it’s so much more than I anticipated.
No, it is not close in most instances. GFE (good faith estimate) shows the total amount of all settlement charges, including those paid by the seller and/or lender. It is very difficult to calculate the exact amount you will need, but roughly you need to be prepared that it will be $2K-$3K more than you were told or anticipated. If interest buy-down is involved, this will additionally mess up up GFE and final HUD-1. To try to calculate the amount yourself here are the component you’ll be responsible for:
Rehab amount (plus 10% contingency fee) – in case you pay renovations out of pocket
Interest buy-down amount – if you’ll be buying down your interest rate using your own funds
Escrow deposit – reserves deposited with lender which normally consists of 3-months of property taxes along with 3-month of homeowner insurance premium
Homeowner insurance – prepaid for the whole year in advance
Interim interest charge – interest charge from the anticipated loan origination date to your next billing cycle
Add $1K-$2K for other expenses not included above (such as mandatory city report, recording fees etc..)
Also, since it’s really difficult to precisely calculate the amount you’ll need to bring on closing, more than likely you’ll get a refund later from an escrow company for the excess amount you paid on closing day.