Paid Outside of Closing (or POC) 2015

HUD-1 Costs Paid Outside of Closing

When you are in the process of a buying a home mortgage you ought to know all the expected fees and costs that are waiting to be paid outside of closing (POC) in the mortgage deal. In the  The Department of Housing and Urban Development – HUD RESPA forms several costs are mentioned and those are included in the mortgage loan, some are not on the list but will need to be paid outside of closing.

The best advice would be to self-educate yourself on mortgage loan tips. You do not need to be a certified loan officer, but the most valuable thing you can do, is learn from a former loan officer how to get the lowest rates, and avoid paying lenders ‘junk’ fees. Yes education costs, (not much) but ignorance is by far more expensive. For example you can save thousands by bumping up your credit score.. Do Credit Repair HERE – Get This Low Cost Guide Thousands Use To Do It

HUD and Homebuyers

The HUD RESPA is made for exactly this purpose, as from January 1, 2010 all the costs are expected to me mentioned and stated clearly. The payments and fees which are paid outside of closing (POC) are also mentioned in section 1400 at the HUD-1 forms. RESPA (Real Estate Settlement Procedures Act) is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.

HUD-1 or HUD-1A Settlement Statement

Before you go to settlement you are entitled to get what is called HUD-1 or HUD-1A statement of settlement costs. This HUD-1 or HUD-1A show all the costs, fees and charges you will have to pay throughout the life span of the mortgage settlement. In the HUD-1 you will see all the initial terms of the loan and each and every monthly payment due. In the 2011 revised HUD-1 there is a better comparison ability between the HUD-1 and the GFE (Good Faith Estimation) you received with the mortgage quote.

What Closing Costs Include

The HUD RESPA has a specific list of cost which should be clear and correct when added to the closing costs of the mortgage, (“800″ series on HUD-1 form) within this list are:

Costs Paid Outside of Closing (POC)

There are several payments that are processed outside the mortgage and those need to be written at the POC section in the HUD-1 forms. These costs are usually payments of fees such as those for credit reports and appraisals. Those are funds you will need to add to your (ever growing) expense list and because they are paid to a third party (credit report check) and paid by you before the closing or settlement of the mortgage loan.

Many people are confused by this POC – Paid Outside Closing, because they pay money at the closing settlement and do not know what to include and what to exclude as POC. The rule of thumb is that any thing paid by the borrower at the closing table is not a POC item. Any thing you pay outside the closing settlement but are a must to complete the process and are not financed through the mortgage it self are POC, as they are paid outside the closing.

POC Conclusion

Fees that are payed by the lender (to their service providers) after the closing of the settlement are usually added to the loan itself and are not paid separately by you, so those should not be added to the 1400 section at the HUD-1 form as they are not – Paid Outside Closing.

So What Can You Do To Improve Your Situation?

If you will do nothing.. don’t expect anything to happen. The best advice is to bump your credit score up! It will give you better leverage when facing the lenders, and better negotiation position when applying for any financial need.

Lets not forget you are probably paying $500-$1000 extra per year in higher interest rates, and credit payments.

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You are probably paying thousands of dollars per year in fees and interests to credit companies which could be going straight to your pocket. Don’t be cheap when it comes to financial education..

Ignorance costs more.

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