DSCR Loan to close on 4 unit. Are these closing costs crazy???

Question

Please help me make sure we are not getting took. The seller is paying our closing costs and we are afraid that high fees will cause him to back out. We are buying in our own name not an LLC. Pennsylvania

Purchase Price $450,000 on 4 unit

Rate 6.249. 30 year fixed- 5 year PPP

Mortage Broker Fee.  12,323.00

Underwriting fee 1795.00

Document prep fee 195.00

appraisal fee 805.00

credit report 200.00

entity review fee 495.00

appraisal review fee 250.00

title closing protection letter 125.00

endorsement fee 100.00

endorment fee 100.00

title settlement agent fee 255.00

lenders title insurance 3157.00

tax status research fee 30.00

recording fee for deed 93.00

recording mortgage fee 142.75

tax city county stamp deed 2250.00

tax state stamp deed 2250.00

prepaid interest 1,047.00

property taxes 1,334.00

Title owners title insurance 565.30

ESTIMATED REQUIRED FUNDS OR CASHBACK

Sales contract price 450,000

borrower closing costs 32,022.00

Total due from borrowers- 482,022.00

Loan Amount 360,000

Seller credits 4,500.00

other credits 9,000

total credits (seller and others) 13,500

Total due from borrower 482,022.00

Less total mortgage loans and total credits 373,500.00

First mortgage P and I- 2216.35

Homeowners Insurance 200.00

Property taxes 667.00

Total monthly payment 3083.35

Patrick Roberts · Answer

Broker fee is high, unless it's being offset by the unlabeled "other" credits, which I suspect is a credit from the broker.

A couple of the lender fees are junk fees (entity review, appraisal review for sure). Overall, $5k of this is going to the state/county and another $4k is going to the attorney/title co. Even without a loan, you would still have to pay that $9k. The prepaids are another $3k and about $2k of that is for taxes and insurance - same story with these - you would have to pay taxes and insurance even without a loan. You're just paying them now into escrow vs later.

6 1/4 for a multifamily 80% LTV purchase isnt bad. Assuming the other credit is a credit from your broker, then I would say that maybe this is $1k or so overpriced on the lender fees, but its not like youre being gouged. If the other credit is not a credit from your broker, then the broker fees need to come down a good bit.

John Matthew Johnston · Answer

@Chris Seveney Thanks for the feedback. We are just so far along in the process and will probably close next week. It’s a great property and it cash flows from day one without doing anything to do. I’m nervous that if we re start the process all over again that the seller will back out. Not sure what to do

Erik Estrada · Answer

This is very common on purchase transactions. I actually lose quite a lot of business by being honest and upfront about fees and terms. Some clients would rather hear what they want to hear and then end up paying for it once they are a week out from closing. Don't get me wrong, some investors do back out of the deal if financing does not make sense, but most of the time they don't.. Hence why there are so many bad players out there.

Spending a bit more time finding a reliable trusted lender or broker goes a long way.. It will save you the headache of constantly searching for good terms and being burned.

If I were in your shoes, I would have a strong conversation with your broker to reduce those fees. 3.4 pts is absurd, and it seems like he just taking advantage if you did not know this when you pulled the trigger.

John Matthew Johnston · Answer

@Marcus Auerbach Thanks for the advice , appreciate it

Devin Peterson · Answer

Most of what you listed is just a regurgitation of associated closing costs that are unbalanced and un finalized until the closing date is set. What I recommend is you ballpark estimate anywhere between four and 4 1/2% of your sales price for closing costs, and then round down from there.  TheLender can only control so much, or origination and underwriting is usually the extent of that. Everything else you were obligated to pay according to county municipality requirements for taxes, as well as insurance, premiums, daily interest, etc..

If you would like cheaper origination fees, I recommend finding them under who can do a no point loan for you they are out there!

Erik Estrada · Answer

Are the other credits listed for $9000, a lender credit?

Seems like you are getting grilled on that 3.4% broker fee. Pretty hard to justify this. You are also paying an additional $2,735 in lender specific fees. They are charging you $495 for an entity review fee even though you are closing in a personal name FYI

What is the par rate? (No Credits). Is this a wholesale lender or private lender? Is making a Yield-Spread from the rate?

In my opinion the costs are very high to justify this loan. You are better off securing a slightly higher rate, lower lender closing costs. Or maybe see if the broker can lower that fee...

Zach Wain · Answer

Ask the lender for options with a higher interest rate and reduced broker fees and/or reduced PPP term.  A 5 yr PPP is nuts to me.

Andrew Lee · Answer

As others mentioned, that seems like a more expensive loan (especially the origination points). Happy to help you in the future if you need any advice or looking for another property.

DSCR Loan to close on 4 unit. Are these closing costs crazy???

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