Cash-Out refi disclosure very different from estimate?

Question

Hey everyone! It’s my first time nearing the end of the BRRRR cycle and I got a rate of 2.75% with an 80% LTV FHA. I am to be given a cash out estimate of $40,000 at closing, with a new mortgage of $2,400/mo.

Now I’m due to close on Nov, 1st and looking at the disclosure they sent me today I see that it’s $33,000 cash out.. I gave them a call and they said that I don’t have to pay any mortgages until January, plus any escrows that I had with my previous title company for the last quarter will be given back to me, which should total to near the $40,000, but is that really counted towards my cash-out?

Just wanted to confirm with you guys. As $7,000 sounds rather like a big difference. Thank you!

Joe Splitrock · Answer

@Jobee Vincent Buenaventura the first payment date has nothing to do with cash out, so that part doesn't make sense. The escrow does figure into the numbers, because that is prepaid taxes and insurance. Since you are not transferring existing escrow to the new, they are paying it out out of "cash back funds" and then you get a refund later. That should be included as part of your cash back.

I would subtract escrow from the $7000 and figure out what accounts for the difference. Is it a missed appraisal amount or some other error in the math. You should be able to compare your sample settlement statement with the final paperwork. If your estimate didn't include a sample settlement statement, then it is hard to say for sure what is causing the gap. It could be prepaid points, added mortgage fees or some basic math error on the part of your lender. Dig in and figure it out.

Matthew Crivelli · Answer

Typically all of the closing cost, tax and insurance reserves, title company charges etc.. etc.. comes out of the cash out figure. Ask the lender / title company for a break down of where the money is actually going.

Jobee Vincent Buenaventura · Answer

@Wes Singleton I’m still living in the second unit of my 2-family and going FHA was the only way for me to get that 80% LTV. Anything else would restrict me to 75%. And no, it’s not a portfolio lender. It’s for 30 years locked at 2.75%

Wes Singleton · Answer

@Jobee Vincent Buenaventura are you using a portfolio lender or are you refinancing with a conventional loan?  Is it a 30 year term?  I'm trying to see if my portfolio lender is offering good terms (80٪ltv, locked rate for 5 years, amortized at 20 years).

Jobee Vincent Buenaventura · Answer

@Matthew Crivelli thanks for the tips! So I did call them about it and for some reason the LTV was changed to 78.5% instead of 80%. How that came to be, I don’t know. But they said they will have it changed by the closing date.

Cash-Out refi disclosure very different from estimate?

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