HELP!!!Why The Heck are these closing costs so high?

Question

My husband and I just had our offer accepted for a triplex. We are attempting to use a 203k. We got our first closing cost estimate  and we were blown away by the freaking closing costs. 20K before rolling in our UFMIP

That seems crazy high to me. I was thinking 6% plus another 1,000 for consultant fees.

We asked for and received %6  sellers assist but the fees still seem high. Anything we can do? do this look about right?

We have another lender we are talking to and we are waiting for him to get back to us.

Alex Deacon · Answer

@Amia Jackson Paul Defngin Amia I agree with Paul. I am an agent in the PGH market the other side of the sate from you. The fees are all in line and you may be able to negotiate some of the bank fees but for the most part the other fees are pretty much set in stone and cant be negotiated. Such as taxes, title insurance, PMI premium.

Chris Mason · Answer

Hi @Amia Jackson,

Some context for you.

203k is a whole boat load of extra work, and the operations folks doing them is highly specialized. No firm is going to maintain a renovation mortgage department unless it pays for itself.

• Some places (this one) itemize the fees out, start with a normal interest rate, and give you the choice to bump the rate to absorb them.
• Others have fewer 203k fees, but have a pre-jacked-up rate, that you can buy down with discount points in lieu of calling it fees. 
• And, of course, a third model is somewhere in the middle.

Either way it's a shell game, and 203k is expensive. It's just a choice, basically, of what the lender wants you to have sticker shock over. No matter the default structure of the three options above, you can swap rate for fees, or fees for rate, to have it your way.

I tend to lean towards taking the bumped rate to cover fees, myself, because a) if your renovation project has enough value add, you might just be refinancing to drop mortgage insurance in six months anyways or, barring that, there's b) this little guy to drop you down to a normal interest rate, which works because 203k is a type of FHA mortgage.

Rich N. · Answer

@Amia Jackson

What makes it higher than normal is fees associates with the 203K...that is 3200 dollar.

Are you sure about the 1900 for property taxes?  I have paid home insurance in advance, but do not remember paying property taxes a year in advance.  The normal escrowing of the taxes is in place (159/month?).

Amia Jackson · Answer

Hi Guys,

Thanks to both of you for your replies. I talked to the other mortgage guy and he said what you said, fees are about the same across lenders.

He also said that my cash out of pocket could be way less than that. The supplental orgination, and all hud fees can be finace into the mortgage. With sellers assist and all rehab fees financed its more like 8k to 9k in closing cost without lender credits.

Paul Defngin · Answer

@Amia Jackson sorry for the tardy reply. Looking at this, it does not seem to be too terribly off base.  The only item that I would say you can probably negotiate is the loan origination fee.  The rest are pretty standard. One thing to remember is that you guys in PA have all kinds of taxes, property, school, etc and all of that appears to be included here. Enjoy the rest of your weekend.

Amia Jackson · Answer

There are just blanks above the cut

The 1900 is one year of property taxes

Amia Jackson · Answer

Hey @Paul D. here's the other page