Do These Closing Costs Seem Right??
Hello!
I am currently in the process of purchasing my first multiunit house hack in the Philadelphia area. I am using a 3.5% down FHA loan and have received a loan estimate on a property. The property is $425,000 and the loan estimate says my closing costs will be $22,922. Is this right or is this extremely high? When watching Brandon evaluate deals he's usually around $7500 in closing costs for this price range of a property.
Please let me know and all answers are appreciated.
Who's your lender? Is that your closing costs only? I'd make sure they didn't add the DP and closing costs together so you aren't misinformed. If it was 22.9K in closing costs that'd be insane!
It would make sense that your 3.5% is included in that figure. Take that out and you're closer to $8k in closing costs.
I agree with Nick C. Either way, ask them for a preliminary HUD 1 Settlement statement. This will show you all the cost of the closing. You're also using FHA, this means that the bank can only charge so much. FHA puts limits on what can be charged and how much. Some reading:
https://www.nerdwallet.com/art...
https://www.bankrate.com/mortg...
Make sure you're not paying any Origination Fee, if you are, start shopping around. You'll find a big difference between banks, small and large, credit unions and so on.
If you haven't finalize your agreement for the property yet, see if the "Seller" is willing to pay 50% of the closing cost. If not, ask for 5 or 7K in sellers credit. Never ask for the money to be used for anything specific. You don't want to be locked into anything, you want to have the flexibility to use it as needed.
This is definitely too high for just closing costs. @Tim Miller gave you really good advice.
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This is the loan breakdown. The 22.9K is not including the down payment. A picture is shown below.
you're getting killed on PMI, probably because of your low downpayment. Still looks awfully high.
They are also taking out a full year of property taxes and you have high transfer taxes, which Im not sure is typical for your county.
I agree with Kevin, The MI is brutal. This is money down the drain that you'll never get back. I wonder if you can take that $7k and add it to your down payment, so the lender won't require so much MI.
Another reason your figure is so high is you're paying a year of property taxes and a year of insurance up front.
That upfront MI is standard for FHA loans and financed into the loan. That's not a fee charged by the lender. FHA loans can be costly but the benefit is you can purchase a property for little money down.
Regarding the property taxes you’ll get a credit for a portion of that to account for when the seller owned the property.
I've done two FHA househacks. Closing costs are always going to be high because of the upfront MI premium which is unavoidable. That said looking at your closing disclosure you have some ohter costs that seem high. Your lenders title coverage is a little high, I wouldn't shop for it but its possible. What really sticks out is $4.2k in transfer taxes, what is that for?? Maybe my state is different but I haven't paid anything close to that and its your 3rd biggest expense.
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Originally posted by @Faruk Al-Hassan:I've done two FHA househacks. Closing costs are always going to be high because of the upfront MI premium which is unavoidable. That said looking at your closing disclosure you have some ohter costs that seem high. Your lenders title coverage is a little high, I wouldn't shop for it but its possible. What really sticks out is $4.2k in transfer taxes, what is that for?? Maybe my state is different but I haven't paid anything close to that and its your 3rd biggest expense.
PA has a transfer tax many times the sellers pay it.. and there is also a very big school tax on transfer looks like sellers paying that one.
lots of prepaids in this deal and the PMI is simply so you can house hack with such a low downpayment.. dont want PMI put more money down
Thanks @Jay Hinrichs. Its always interesting to learn about the differences in costs in various markets.
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Originally posted by @Faruk Al-Hassan:Thanks @Jay Hinrichs. Its always interesting to learn about the differences in costs in various markets.
State of Washinton has what they call an excise tax which is 1.5 to 2.3 % of the sales price that needs to be paid to transfer a title
this is customary for seller to pay.. so when you figure median home price in the Vancouver market is probably close to 500k
and SEattle well over a million thats 7500.00 to 25,000 and more paid to the state .. if you dont pay it you can record the deed and transfer title.
but you have no state income tax in WA so these things tend to all balance out..
