Closing costs from 13k to 17k for $380k NJ home

[Alexie Franck]

Hi All, I need another opinion/clarity about my closing costs. Home is a multifamily for $380k, conventional loan, bought 1 point and interest is 6.125. Initial closing cost estimate was $13.5k. Just received disclosure and it jumped up to o$17k. My closing costs are as much as my down payment. I thought it was to be up to 3% of home purchase price. Then the extras, ie: points. This is over. Please help. Thanks!

[Bill Brandt]

I don’t like most of those “services” but maybe they are common in your market and they are small amounts. I’m guessing, since you say it increased $5k and the prepaids are about $5k that’s what happened. 

Those aren’t loan expenses and they aren’t really extra expenses. You are simply putting funds in an account for the lender to pay to other people eventually. (Your payment will include escrow amounts to replenish these funds but they wouldn’t be able to make the first payments.)

[Alexie Franck]

Bill, you are the first person who I've asked to put it in lament terms. Thank you! Your explanation helped. 

[Derek Brickley]

Fees in every state/municipality will vary, but let me comment based on my experience.  With that disclaimer out of the way I look at that in a few ways:

- Off the bat, your lender fees appear to be lsightly above average.  Although they wrap it all up into one fee, out flat fees are $395 underwriting and $395 processing with a $60 technology fee.  That probably didn't change for you though from your initial loan estimate and the difference isn't that great really.

- From my standards, your title fees are extraordinarily high.  For that loan amount, we typically see title fees sitting around $1,700-$1,800.  Note that because it is "a service you can shop for" there is no limit to a potential increase.  Compare what they quoted you for title fees initially and you may see a significant jump here.

- In Section H, I'm not familiar with what MISC charge could be $1,400.  Maybe just a different municipality, but I would ask for more detail if you don't already know what that is.

Although potentially high, to work through the differences compare your loan estimate and see what line items were added/changed.  Were you initially paying a point for your rate, or did you agree to that after the fact?  Generally speaking, a good rule of thumb is to expect your closing costs between 3%-5% excluding any points paid so even though they may be slightly higher than other lenders, they are still in that industry-wide range.

[Russell Brazil]

Quote from @Alexie Franck:

Hi All, I need another opinion/clarity about my closing costs. Home is a multifamily for $380k, conventional loan, bought 1 point and interest is 6.125. Initial closing cost estimate was $13.5k. Just received disclosure and it jumped up to o$17k. My closing costs are as much as my down payment. I thought it was to be up to 3% of home purchase price. Then the extras, ie: points. This is over. Please help. Thanks!

 The point is extra. Application fee is abnormal to have, and obviously high. Credit report fee high, should be more like $25-30. Section C a little high, but not outrageous. 

Section F is just funding your escrow. Amount set by law there. Can be forgone if you have a high enough down payment, then you pay your own taxes and insurance. 

Section H line 1, no idea what that is. Line 2 Survey...is that needed in this instance? Surveys are optional in most cases now. 

[Alexie Franck]

Thank you for this! The fees are higher than the first quoted fee. I will need to ask them to adjust. I'm feeling more confident in understanding these costs and tweeking here and there wouldnt make a huge dent in the costs it seems. 

[Dave Skow]

@Alexie Franck- 1) compare the intial estiamte ytou  recived to  the current one ...ask  your lender to explain any difference you  are able to  figure out   2)  Dont lumop in the prpaid taxes / insurance / interest to the  total of the  closing costs ...these prepaids  are  required to  establish impound account and pay  ins. premium ...these should be  explained  at the  beginning of the process so you understand that these are  needed .    6.125%  with  1%  loan fee  sounds   decent for a MF loan 

[Melissa Maw]

As a loan officer licensed in PA and NJ, I'd like to add a few comments.

First, I would second what @Dave Skow said. Prepaids are NOT closing costs and usually are required by your lender. Escrow is set by law and you cannot forgo it (no matter the down payment) if that is what your lender requires for this type of loan. Every lender/mortgage program is different. It's your money, you're just prepaying taxes, insurance and whatever interest from the day you closed. It's the responsibility of your loan officer to quote this as accurately as possible on the LE. However, the lender will verify and confirm the final numbers once they get the tax cert from the title company, the insurance premium from you (the buyer), etc.

While the "Application fee" is high at a quick glance, if you replace that with the word "underwriting", then the underwriting fee you have on the CD is pretty standard. Its usually $1495 - 1595. 

Credit Report fee is standard. In case anyone is unaware, credit agencies increased their fee in 2024. It now costs over $70 for a single borrower, close to $160 for 2 borrowers. I haven't seen credit report fees that cost $30 since 2021. Traditional banks tend to have lower credit report fees, but the wholesale lenders that I work with generally charge $180 for a credit pull for dual borrowers. 

As for section C - these are all title services and unfortunately, they are common for NJ, even the "Survey" fee.

The only thing I cannot account for is the $1400 MISC fee in Section H.

Hope that helps. If you have questions, just ask your loan officer to go over it line item-by-line item. Personally, I appreciate it when my clients ask me these questions because it means they are taking the time to understand the loan docs. 

[Alexie Franck]

Quote from @Melissa Maw:

As a loan officer licensed in PA and NJ, I'd like to add a few comments.

First, I would second what @Dave Skow said. Prepaids are NOT closing costs and usually are required by your lender. Escrow is set by law and you cannot forgo it (no matter the down payment) if that is what your lender requires for this type of loan. Every lender/mortgage program is different. It's your money, you're just prepaying taxes, insurance and whatever interest from the day you closed. It's the responsibility of your loan officer to quote this as accurately as possible on the LE. However, the lender will verify and confirm the final numbers once they get the tax cert from the title company, the insurance premium from you (the buyer), etc.

While the "Application fee" is high at a quick glance, if you replace that with the word "underwriting", then the underwriting fee you have on the CD is pretty standard. Its usually $1495 - 1595. 

Credit Report fee is standard. In case anyone is unaware, credit agencies increased their fee in 2024. It now costs over $70 for a single borrower, close to $160 for 2 borrowers. I haven't seen credit report fees that cost $30 since 2021. Traditional banks tend to have lower credit report fees, but the wholesale lenders that I work with generally charge $180 for a credit pull for dual borrowers. 

As for section C - these are all title services and unfortunately, they are common for NJ, even the "Survey" fee.

The only thing I cannot account for is the $1400 MISC fee in Section H.

Hope that helps. If you have questions, just ask your loan officer to go over it line item-by-line item. Personally, I appreciate it when my clients ask me these questions because it means they are taking the time to understand the loan docs. 

 You're awesome for this, thanks! Thanks for confirming thhat my LO is the bees knees! The H2MISC @1400 and the prepaids had me reeling. Closing is in a few few days and hoping everything will be itemized correctly. I've gone back asking about removing the survey cost and the MISC (which Im thinking may be the lawyer fee but that's less than quoted) my lender questioned it too. 

[Alexie Franck]

Quote from @Russell Brazil:

Quote from @Alexie Franck:

Hi All, I need another opinion/clarity about my closing costs. Home is a multifamily for $380k, conventional loan, bought 1 point and interest is 6.125. Initial closing cost estimate was $13.5k. Just received disclosure and it jumped up to o$17k. My closing costs are as much as my down payment. I thought it was to be up to 3% of home purchase price. Then the extras, ie: points. This is over. Please help. Thanks!

 The point is extra. Application fee is abnormal to have, and obviously high. Credit report fee high, should be more like $25-30. Section C a little high, but not outrageous. 

Section F is just funding your escrow. Amount set by law there. Can be forgone if you have a high enough down payment, then you pay your own taxes and insurance. 

Section H line 1, no idea what that is. Line 2 Survey...is that needed in this instance? Surveys are optional in most cases now. 

 Straight to the point! And I've gone back to ask. Thank you! 

[Alexie Franck]

Quote from @Dave Skow:

@Alexie Franck- 1) compare the intial estiamte ytou  recived to  the current one ...ask  your lender to explain any difference you  are able to  figure out   2)  Dont lumop in the prpaid taxes / insurance / interest to the  total of the  closing costs ...these prepaids  are  required to  establish impound account and pay  ins. premium ...these should be  explained  at the  beginning of the process so you understand that these are  needed .    6.125%  with  1%  loan fee  sounds   decent for a MF loan 

 Thank you Dave! When you say decent...are people getting rates lower nowadays? And how? 

[Dave Skow]

@Alexie Franck-  thanks ...6.125%  rate   with 1% fee+  costs on a MF are  excellent terms  right now