DSCR Loan Closing Cost

Detroit, Michigan
Buying & Selling Real Estate
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DSCR Loan Closing Cost

Elton TatePro Member
Investor · NC · Member since 2023 · 35 posts · 7 votes

Happy Wednesday!

I hope everyone's week is either going as expected or better than expected. I have questions regarding the DSCR loan process and the associated closing cost. I'm reviewing the loan document, and I noticed that the total closing cost is $12,374. The lender mentioned he overinflated everything, so there are no surprises, and that I should expect a much cheaper final closing cost. The property is located in Detroit, 48224 area. Out of all the things that trip me up in real estate, I think this is the main culprit. The numbers appear to be double what they should be, but maybe I'm mistaken. I want to be more confident when reviewing loan documents.

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Jason WrayPro Member
Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
2y

Elton,

When a lender is doing a loan under $100K expecg higher rates/fee's. DSCR typically has between 2.00-2.75% points. Your points seem a little high but again it's an $80K loan so its a price you have to pay for those smaller loans.

Other fee's look padded and transfer taxes can sometimes be split or paid by seller.

[email protected]727-637-4289
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  • Jason WrayPro Member
    Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
    2y

    Elton,

    When a lender is doing a loan under $100K expecg higher rates/fee's. DSCR typically has between 2.00-2.75% points. Your points seem a little high but again it's an $80K loan so its a price you have to pay for those smaller loans.

    Other fee's look padded and transfer taxes can sometimes be split or paid by seller.

    [email protected]727-637-4289
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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 664 votes
    2y

    What Jason said! For anything under 150k-100k loan amounts, you will see higher rates and fees. It all dials back to the servicing and set up of a loan. Over-inflating closing costs is good and should be a common practice for LOs who don't know what most of the fees are upfront because its very true that things such as title, taxes, prepaids, etc. are all unknowns.

    [email protected]860-538-3672
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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Elton Tate:

    Happy Wednesday!

    I hope everyone's week is either going as expected or better than expected. I have questions regarding the DSCR loan process and the associated closing cost. I'm reviewing the loan document, and I noticed that the total closing cost is $12,374. The lender mentioned he overinflated everything, so there are no surprises, and that I should expect a much cheaper final closing cost. The property is located in Detroit, 48224 area. Out of all the things that trip me up in real estate, I think this is the main culprit. The numbers appear to be double what they should be, but maybe I'm mistaken. I want to be more confident when reviewing loan documents.


     If I were in your shoes I would request a preliminary settlement statement showing all actual lender fees. 

    Lenders over disclose on TRID loans because of the cost to cure. It is not common on DSCR loans although some lenders also do FHA/Conv. loans so they follow the same protocol.

    [email protected]818-269-7983
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  • Philip Polski
    Member since 2024 · 9 posts · 12 votes
    2y
    Quote from @Elton Tate:

    Happy Wednesday!

    I hope everyone's week is either going as expected or better than expected. I have questions regarding the DSCR loan process and the associated closing cost. I'm reviewing the loan document, and I noticed that the total closing cost is $12,374. The lender mentioned he overinflated everything, so there are no surprises, and that I should expect a much cheaper final closing cost. The property is located in Detroit, 48224 area. Out of all the things that trip me up in real estate, I think this is the main culprit. The numbers appear to be double what they should be, but maybe I'm mistaken. I want to be more confident when reviewing loan documents.


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  • Philip Polski
    Member since 2024 · 9 posts · 12 votes
    2y

    Hey Elton,

    If you contact me directly I'll give you thee name of someone I've used in your area. 

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  • Elton TatePro Member
    OP
    Investor · NC · Member since 2023 · 35 posts · 7 votes
    2y

    Thank you everyone for your feedback! 

    @Philip Polski, I will send you a message.

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  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    2y

    Hey Elton, I did a duplex in Detroit on a DSCR loan just the other week.

    My lender fees were $2,300 total. 

    That said, as others have pointed out, you'll pay more fees for loans under $100k. I had a 75% LTV loan on a $193k appraisal, so we were over that $100k mark.

    That said, have you shopped this a bit? I know DSCR loans are an absolute pain in the butt to shop around given there's basically no standardization on fees and terms. But in this case it might be worth doing.

    I could send you a handful of folks I talked to and know, including the person that did mine (although not sure they do sub $100k loans).

    1Reply
  • Luis Astudillo
    Member since 2024 · 23 posts · 8 votes
    2y

    I am a mortgage broker; I haven't done any loans in Detroit but this is where you do your due dilingence by calling the title company and finding out what their cost/fees for doing the settlement will be; you would have to give them the subject property address, and tell them that is an investment property. Once you have found out what their fees are, you need to find out how many months of property taxes you would have to pay as a buyer, then call your insurance company to find out how much your annual premium will be; there may be aditional fees in Detroit that I may not be aware of. Add all those fees plus however many points your lender is charging you. In a DSCR loan, a lender/broker would charge an average of 2 to 3 points of the loan amount.

    1Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Elton Tate first, you need to understand the difference between loan fees and transaction fees.

    Areas E, F & G are outside EVERYONE's control and you'd pay all but G if you bought with cash.

    So, your Closing Costs are really only $5,932

    Now, $200 for a credit report is crazy unless they are pulling Dunn & Bradstreet on your LLC.

    Title charges, except for closing fee, are regulated by the State of Michigan Insurance Division.

    Why aren't you working with someone that knows all this?

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  • Elton TatePro Member
    OP
    Investor · NC · Member since 2023 · 35 posts · 7 votes
    2y

    @Michael Smythe, I'm new to all of this, I guess. This will be my second property and the first time I will use a DSCR loan.

    Hey @Travis Biziorek, I definitely would like to know your contacts.

    Thank you for the info, @Luis Astudillo.

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  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Elton Tate "I'm new to all of this, I guess" - yet you're trying to do it all on your own from OOS?

    You should find an expert to work with (after careful screening!). 

    Save this post, because if you think you can find and manage Class C tenants from OOS, there's a VERY high chance you will end up being penny-wise, but dollar-foolish.

    Hopefully, you'll be able to recover from your mistakes & losses and won't have to sell at a loss.

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  • Jim WellingtonBusiness Member
    Real Estate Agent · Saint Clair Shores, MI · Member since 2022 · 73 posts · 51 votes
    2y

    I could have crushed these fees with no problem! 

    [email protected]586-204-2010
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