Are these closing costs too high?

14 Replies

Hello, 

I am looking to close on my first property and I just got the paperwork to sign from the lender & the closing costs are about 10% of purchase price(not loan amount). 

I know typically the closing costs are a lot lower. 

What do guys think?

Purchase price: 80k

Loan amount: 60k

Total closing costs: $8,599

Most of the costs are bank cost for loan origination.  You've got about $1000 for title stuff and title rates are usually set by state insurance commissioner.

Did you get a prelim GFE from your lender and these charges weren't on there?

@JR Rivas Looks like you are getting "fee'd" to death in my opinion. Example, you are paying lender points + processing fees + underwriting fees, lenders I work with just charge the points as the fee for their service and not these bolt ons on top. There are a bunch of other fees in there that I don't typically see with the deals I do as well. Depending upon the state you are in you will see certain recording taxes and transfer taxes and these can be pretty standard. The hazard insurance and property taxes are fairly standard as well. I'd suggest doing a little comparison shopping with other lenders and ask specifically about these fees listed here and if those lenders have the same costs.  I do think you could do better with another lender.

I didn't go line-by-line, but yes - that looks high.  Part of the problem is you're paying over 2 points to the lender.  I don't know what that bought your interest rate down to, because you don't list it.  But that's $1,339 right there.  

And then $700 for an appraisal on what I assume is a single family house?  Granted that goes to the appraiser, but that should be more like $350-$400.   

And lastly, $1,800 for insurance on a $80k house is ridiculous unless there's something unusual going on or you're in a flood zone or something.  You need to shop that around.

Proportionally your closing costs are always going to be higher on smaller loans. As a lender none of your fees look out of line if you are getting the rate bought down for the points you are paying and based on the rate I would say that you were. I always recommend shopping your insurance with multiple agents even to existing customers because rates increase yearly and just because the insurance you start with was the best deal doesn't mean it stays that way. 

If you know your closing cost going into negotiations than you can make your offers accordingly. Once you develop a relationship with a bank you will be more familiar with their fees and terms and will know what to expect from them on each deal you do. From my experience when working with mortgage brokers your interest rate will be lower but your closing cost will be higher. If working directly with a portfolio lender than your rate will be higher but closing costs will be lower. 

Good luck getting started investing in real estate.

@JR Rivas

I just bought a sfh to rent out, only 65k though. My closing costs were 1000 and my insurance is 329 for the year. How much coverage are you getting? The insurance seems really high. Mine covers the cost of the house and 300k in liability, just to compare. I agree w the guy who said you are getting fee'd to death. Paying 2 points and then all the fees on top feels excessive, but I'm not an expert. Your rate is really good at least.

Don't know FL law, but in OR you should get a prelim GFE and then BEFORE closing title should send a prelim closing statement.  Compare the 2 and ask questions then NOT when you walk into close.

the lender is giving it to you with no lube. shop lenders, get with a broker, etc. local credit unions are usually best on rate %. also, do you really need a nanny to pay your insurance and taxes for you? wave escrow (might come with a small fee). 

Shopped the insurance got a $1200 rate for the year. 

I forgot to mention in the initial post that these are 2 houses on 1 lot which could account for fees being slightly higher like the appraisal fee.

Originally posted by @James Webber :

@JR Rivas

I just bought a sfh to rent out, only 65k though. My closing costs were 1000 and my insurance is 329 for the year. How much coverage are you getting? The insurance seems really high. Mine covers the cost of the house and 300k in liability, just to compare. I agree w the guy who said you are getting fee'd to death. Paying 2 points and then all the fees on top feels excessive, but I'm not an expert. Your rate is really good at least.

 Insurance in Fl is very high compared to most of the nation. Lost of insurers won't even write there.

@JR Rivas

Your loan costs are ridiculous. You might be stuck if you don't have an application already processing with another lender though. I think we've had 6-8 week loan closing timelines due to volume lately...

Good luck, worst case it's an expensive lesson. As far as lessons go, people have paid more and learned less.