Am I getting hosed on Closing costs

[.45Cole]

So I'm in the market for a first time buyer home. I have been getting all the research done and I got these figures from the lender. I know some of these are prob legit (the gov ones), some are negotiable, and some are pocket liners. Here is what they had totaled for a 150k purchase.

I assume that somebody here is in the business and can tell me which to fight, and which to roll over on.

Purchase 150k
Loan 142.5k

Origination Fee (1%) 1.425
Lenders Title Fee 625
Title Settlement Fee 600
Apprasial 500
Processing Fee 350
Underwriting Fee 400
Credit Report 112
Recording Fee 150
Courier Fee 20
Wire Fee 20
Xfer Taxes 15
Tas Service 90
Flood Certificate 10
Verif. Employment 21

[shoot-n-lead]

It has been several yrs since I closed on our last piece of property, but those fees seem about in line. I know that requirements have been added to the closing process and a couple of those fees that I do not recognize (less than $1000) are probably due to those new requirements.

Typical closing costs run about 3%...which is the total of the items you have listed.

You will probably learn that there will be very little negotiating with the lender or vendor of services...it will be their way or no way.

Whatever you do, don't let a few dollars in closing cost prevent you from buying. Remember, whether you rent or buy, you pay for the house you occupy.

[smokeywolf]

Does seem quite rich to me. Do an internet search on those fees.

http://www.homeclosing101.org/costs.cfm

smokeywolf

[Bad Water Bill]

Here in Chiraq a local lender is on the air FOREVER advertising "no closing costs and less than 3% interest.

I am sure YMWV.

[Plate plinker]

Seems steep to me hope someone else can shed ao
e light on it for you.

[shoot-n-lead]

Here in Chiraq a local lender is on the air FOREVER advertising "no closing costs and less than 3% interest.

I am sure YMWV.

That is because the costs are added back into the loan. Be interesting to see how many here have EVER closed a loan with NO closing cost...especially FIRST time buyers.

[tomme boy]

We put them on the seller when we bought our first house. Told them that if they wanted to sell it they would cover the cost. They accepted it. Try it, you never know.

[JonB_in_Glencoe]

Back in the 1987, I bought my first house on a auction (my winning bid was $7500). The only 'extra' fee I paid was a title search, that was about $100.

My second (and last) House purchase was in 1993 ($19K), closing fees were around $800.

edited: no mortgage loan on either house

[Love Life]

I got paid $250 after closing on my last home purchase. They buyer paid $4,900 in closing costs and I ended up getting paid to buy the house...fantastic!!!

As another said, try to have the seller pay the closing costs.

[Char-Gar]

The mortgage lender and title company will have set fees. If you think they are too high, shop around and you might find a better deal. When it comes to who pays for what (buyer vis-a-vi seller) in a real estate transaction everything is negotiable. There are no laws that say what one must pay. It all depends on how motivated the seller or buyer is at the moment and how much they are willing to give up or pay to sell or buy the property.

[dtknowles]

Did you already sign an agreement for the deal on the house? Things are negotiable but after you sign up for a deal is not when you negotiate. Did you put up a deposit to seal the deal? Only 5% down, I would not expect the bank to be cutting you more deals. What was the appraised value, I guess that maybe the appraisal is not done yet, what if the appraisal comes in under $150K? What is the interest rate and it looks like you are not paying any points?

[MtGun44]

Yes, if you haven't been locked in by signing an agreement, spend some time looking
around. And don't be fooled by "no closing costs" which are actually hiding them in
the loaned amount, not getting rid of them.

BIG differences in costs for loans, don't get taken for a ride.

Bill

[RugerFan]

We put them on the seller when we bought our first house. Told them that if they wanted to sell it they would cover the cost. They accepted it. Try it, you never know.

Yes, try this. It is common to ask the seller to pay for part or all of the closing costs.

[Handloader109]

really only the origination fee is truly negotiable. And as others have said, it all depends on price of house, lender, and don't forget your actual mortgage interest rate. might have lower closing and higher interest. for the most part not much wiggle room. I did have very little in origination when I bought current house, but went thru my credit union.

[merlin101]

Look into foreclosure sales, they can be very motivated to move the property and can and will deal.
I picked up a house that had been foreclosed on by the VA, I paid aprox. 30% LESS than it sold for just a few years before and had a lot of improvements done in between.

[Joe S]

The "usual practice" as to who pays what closing costs can vary from state to state. I did not see your lawyers fees on your list, and I would not buy real estate without the help of an experienced real estate lawyer. You need to hire the lawyer to write or review the offer to purchase, not after the offer is written, but better late than never.
If you get to pick the title company, shop around, their prices are not set in stone. In most states, the buyer picks the title company, but not in all states. If you use the same company that the bank uses, you can realize some savings. Make sure you are getting an Owner's Policy of title insurance out of this, not just a lender's policy. You need to take a close look at the title commitment and what is covered and what is not covered. title companies will sometimes write "standard exceptions" into a policy and neglect to remove them when they should, thereby depriving you of coverage you should be entitled to. Also , find out when you can expect to get the owner's policy. some companies wait over a year to do it 30 days would be what I would expect.
The settlement fee seems a little high to me, last time I was involved in one, about two years ago, the average was about $200. Never heard of a "Processing fee" I would ask what that is for and who does it. the only people doing any processing are the bank and title company, and their fees are the loan origination fee and the title policy premium. The rest are all standard, not much to argue about. Check with someone in your area who is experienced in real estate sales, such as a lawyer, to make sure you are not getting screwed. A lawyer is the only one in the process who owes a duty to look out for you.
If the seller pays the closing costs, they are simply building it into the price, it all comes out on the bottom line.
Hope this helps.
Joe S

[.45Cole]

Thanks Joe and everyone elso who has responded. I haven't even found a place I like, but I have a Buyer's Agent I think I like, and I'll prob try to get him to do as much as I can to help me navigate through the process. I just wanted to see how I could get around some of the fees, as my aunt/uncle in KY have many of the fees waived whenever they buy an investment property. Guess I'll shop around through lenders.

[TXGunNut]

One thing not listed is an inspection fee. A good inspection is worth every penny. Another thing missing is the survey and sometimes an engineering report is required by the loan company. As mentioned above the foreclosure market is a good place to look. Learn to play that game, it will be well worth your while. Listing agents on foreclosure porperties will show you the basics. Dealing with mortgage brokers, agents and title companies gets expensive. Almost all closing costs (in TX, anyway) are negotiable.

[BrassMagnet]

Since you are a first time buyer, this is a good audio book to listen to:

121266
Too many times, they will loan you more than you can really afford to pay back. If you follow Dave's guidance, you will buy less house and have more money in your budget to prepare for the coming bad times.

If your water heater dies, or your car, and you have no emergency fund it is an emergency. If you have an emergency fund and your expenses are in line with your income then it becomes merely an inconvenience.

[dtknowles]

Good advice about not buying more house than you really can afford. The calculations that real estate brokers and loan processers use push that number higher than reasonable and will make you a slave to your mortgage. If you can you should make your down payment at least 20 percent otherwise you will have to buy private mortgage insurance, this added to your monthly payment but is no benefit to you.

Tim

[BrassMagnet]

Good advice about not buying more house than you really can afford. The calculations that real estate brokers and loan processers use push that number higher than reasonable and will make you a slave to your mortgage. If you can you should make your down payment at least 20 percent otherwise you will have to buy private mortgage insurance, this added to your monthly payment but is no benefit to you.

Tim

I concur 100%

[BrassMagnet]

Something that happens to a lot of people is they lock themselves into a mortgage they can afford, but barely!
Then they need a replacement car, bills or expenses increase, taxes go up, etc.

I had a co-worker buy a mobile home in a trailer park as close to his work location as he could afford. In years of working with me he got few pay raises, always COLAS, which were never close to the actual cost of living. In this time, his space rental and HOA dues doubled. His fuel costs doubled and his vehicles were wearing out and getting difficult to keep in service. His credit card debt increased as he tried to hang on. He was approaching bankruptcy when he transferred to a lower cost of living area. He rented a small apartment there and began to debt snowball his debt. He sold his mobile home. He is now debt free and shopping for property. It didn't take very long once his expenses were in line with his income.
What kind of expense increases are likely do destroy a budget which the home loan industry considers OK?
A car payment. Increases in energy costs. Increases in insurance costs. Just normal inflation if you are not receiving sizable pay raises.

[blackthorn]

Setting it up so that you make a payment every other week instead of once a month can save you thousands over the life of a mortgage. And this holds true even though the total monthly payment is the same for either schedule.

[williamwaco]

1) Keep in mind that the interest and principal payment is only about 2/3 of the monthly cost. Taxes, insurance and utilities will add another third.

2) If you are worried about the fees, call another lender and ask for a "Good faith estimate". If they ask for an application fee, say "No, I want to see if I can afford it before I close it." If they will not do it, call somebody else.
Closing loans is a VERY lucrative business and somebody will give you a free estimate.

[Bad Water Bill]

Setting it up so that you make a payment every other week instead of once a month can save you thousands over the life of a mortgage. And this holds true even though the total monthly payment is the same for either schedule.

That right there is some of the best advice posted so far.

Your interest is compounded EACH day so by paying every 14 days instead of 30 you generally pay off your mortgage in 15 years instead of the usual 30 years.

Just be sure that you can pre pay before you sign on the dotted line.

[BrassMagnet]

Setting it up so that you make a payment every other week instead of once a month can save you thousands over the life of a mortgage. And this holds true even though the total monthly payment is the same for either schedule.

Yes!

Paying extra on your mortgage each month saves even more.
With a new $150,000 mortgage and a $650/month payment, it would not be unreasonable to expect $20 - $30 per month to go toward principle and the rest to be interest or fees (mortgage insurance). An extra $50 per month would reduce your principal as much or more than your regular house payment. It would also reduce the time you paid the mortgage insurance which could exceed $50 per month.
A fifteen year mortgage will cost a little bit more per month, but far less over the total period of the loan. If you can only qualify for the loan if it is a thirty year mortgage, then you are really buying too much house for your income.
I financed my house on a 30 year mortgage at 8%. After 7 years, I had not made a single extra principal payment. I refinanced at 4 7/8% for 15 years and my monthly payment only went up $20 per month while paying my house off in 8 less years. I had the bank calculate my payment and payoff with $100 extra per month and then with $200 extra per month. I settled for $200 extra per month and I turned that 15 year mortgage into a 9 year and 9 month mortgage cutting a total of 13 years and three months off of the original 30 year mortgage. Additionally, I hid $200 per month of available income in case I needed it for something.

[TXGunNut]

Too many times, they will loan you more than you can really afford to pay back.-BrassMagnet

Exactly! When I bought my current house they told me I qualified for a much larger loan. I had to laugh, I have simple needs and expensive hobbies :cbpour:so I stayed with what I wanted to spend. As it turned out I spent quite a bit getting moved in and settled, I wouldn't have been able to do that with a larger note. My subdivision is filled with homes that were sold to folks that bought more house than they could afford. I benefitted from that by buying an almost new foreclosed home for about 40 percent of what the home cost.

[.45Cole]

I have tried to take escrow (taxes, insurance) into account and I have targeted a total monthly amount for the mortgage. I figure I'll double down one month, and then the next month I'll spend the extra mortgage payment on improvements. I have seen the math (from calc) that on a 30 year mortgage for 150k you'll wind up paying 150k and ~150k in interest:shock:. I figured out the whole double down thing from my first auto loan.

[MaryB]

Wow and 25+ years ago I paid the county $500 + back taxes of $300 and they handed me the abstract and said the property is yours.... $20k++ later I have a nice comfy house that still needs some work but it is all small stuff.

[dtknowles]

Twice I have disappointed my Real Estate broker. I bought houses for half the price range they wanted to take me looking. To much house is bad in so many ways. Beside the mortgage, the insurance, utilities, maintenance is all higher. You need more furniture, you get more stuff to fill it up or just let stuff accumulate. If I was in the market again I would look for a bigger garage and a bigger outbuilding and a little smaller house.

Tim

[Handloader109]

Oh, and don't forget, unless you put down over 20%, you have Private Mortgage insurance, about $100 a month on $150K home. And it doesn't go away now like it used to once you reach the 20% mark.

[dragon813gt]

Oh, and don't forget, unless you put down over 20%, you have Private Mortgage insurance, about $100 a month on $150K home. And it doesn't go away now like it used to once you reach the 20% mark.

It doesn't go away automatically. But when you call and tell them you are above 20% it goes away. PMIs are also tax deductible. They do cost you money but you get a good portion of it back.

Paying one extra payment per year is almost the equivalent of paying bi-weekly. I can only pay bi-weekly if I sign up for automatic payments. I don't allow any company access to my accounts so I pay extra every month that works out to almost two extra payments a year. And all that money goes straight to the principal.

[TXGunNut]

I have tried to take escrow (taxes, insurance) into account and I have targeted a total monthly amount for the mortgage. I figure I'll double down one month, and then the next month I'll spend the extra mortgage payment on improvements. I have seen the math (from calc) that on a 30 year mortgage for 150k you'll wind up paying 150k and ~150k in interest:shock:. I figured out the whole double down thing from my first auto loan.


Have you considered a 15 yr mortgage?

[MtGun44]

The double payment or paying at the 15 year loan rate by choice,
is more flexible for the home buyer than a 15 year loan, because
if you get short and can't afford to pay extra for a while, you are
still OK on the loan.

Paying ahead creates a HUGE, and for some, shocking, savings.

A $150,000 loan for 30 years at 4% has a monthly payment of $716
and by the end you will have paid $108,000 in interest in addition to
the loan amount.

The same loan for 15 years has a monthly payment of $1100 per month,
which may bust your budget, but the total interest paid will be only
$49,700, saving more than $58,000 over 15 years.

Making extra payments as if the loan was a 15 year when you can will
provide similar benefits, with the advantage of being able to "drop back"
to the $716 payment when money is tight.

That extra payment goes entirely to reducing what you owe. where the
regular payment mostly goes to interest in the first decade or more.

Bill

[BrassMagnet]

I believe it is time to post a link to a mortgage calculator.

http://www.mlcalc.com/

[MtGun44]

Good point.

Too bad there isn't a good course in mortgages and similar practical math-related subjects
required in high school. I didn't learn most of this stuff until I was taking an engineering
economics course in 3rd year of college, and most folks should have this basic info to help
them plan what is probably their largest lifetime expenditure.

Bill

[BrassMagnet]

Good point.

Too bad there isn't a good course in mortgages and similar practical math-related subjects
required in high school. I didn't learn most of this stuff until I was taking an engineering
economics course in 3rd year of college, and most folks should have this basic info to help
them plan what is probably their largest lifetime expenditure.

Bill

That is why I push this audio book:

121346