How much do you pay for closing costs?

Question

Looking to make my first home purchase. The plan is to house hack a multi family in Texas. We have $36K to start investing with. I'd like to get into our multifamily primary for maximum $10K including closing costs and then start BRRRRing other investment prooerties with remaining $26K. Just spoke with a lender who offers 3% loans on primary. But closing costs were another $9K. These costs include 1 yr insurance plus 3 months taxes

taxes, loan fees, title fees, etc. The bulk was insurance and taxes (approx $5K) Seems high to me and I'm wondering what ya'll pay for closing costs.

Jim Cummings · Answer

@Jessica Force. I surmise from your first post, this will be an owner occupied situation for you!

If so, you should be able to utilize an FHA Loan, and the total out-of-pocket costs should be in the range of 7.50% - 8.00% of the Sales (Purchase) Price of the property.  Typically, Lenders will allow a Seller to pay 3.50% of the Buyer Closing Costs for an FHA Loan.  If Seller is unwilling to take the "Hickey" or reduction in price, you may be able to add the Closing Costs to the price and have Seller pay them in that scenario.

Examples of how this might look on a property priced at $100,000 are:

1. $100,000 Purchase Price to include $3,500 of Seller paid Closing Costs.

Or if Seller unwilling to negotiate the Closing Costs.

2. $103,500 Purchase Price to include $3,500 of Seller Paid Closing Costs.

Nick Rutkowski · Answer

@Jessica Force

I typically tell my clients to save up to 10% of the purchase price for closing costs. Including prepaids, taxes, bank fees, lawyer fees. Of course, this is if you live in NY or any other high taxed state.

Rob Duke · Answer

Just consider that if you are shopping rates that they change constantly. 10 year Treasury is a good bellwether for mortgage rates and if you see decent changes in that from the time you get one mortgage quote to another you are no longer comparing apples to apples.

Also, find out the rate to wrap fees into a loan(or as many as you can) and without.

Always make sure they are quoting you the EXACT same type of loan (30 year amortized, 5 yr I/O, etc).

Jim Cummings · Answer

@Jessica Force. Multi-family is a tough segment, depending upon the area, and price bracket.  Major factor driving price is location, and inventory.

DFW, Austin, other perceived High Demand areas will have higher prices and less inventory. In the Bryan College Station area, we have some inventory, but the best ones (price, condition, etc) sell quickly, while others are overpriced.

I'm sending you a Lender contact via a PM.

Jessica Force · Answer

Thanks for providing a total out of pocket price range Jim. It took me a minute to understand raising the purchase price to have seller pay closing costs, but I see how it keeps that money in the buyers pocket at time of sale. You are correct, this will be an owner occupied multifamily.  We used to live just down the road from you in Huntsville, TX!

I'm shopping TX lenders this week. If you've got a favorite please post their name and company in the thread. How is the multifamily market in College Station?

Jessica Force · Answer

Thats great advice! I hadn't considered those options, but I'm writing them down and will present them to the seller and lender. To answer your question about paying points to the lender, I'll need to look into that too.We're looking at a purchase price of around $120K.

Jake Roland · Answer

@Jessica Force That doesn't sound too crazy... I'm not in Texas but I believe the property taxes there can be high. Typically around here in AL our closing costs for something around $250k can be about $5,000. What is the purchase price for what you're looking at? If you are paying a point or something to the lender then it could easily be $9k. I suggest shopping lenders a bit and getting some estimates. Also, talk to a local realtor and see what their past client's closing costs have been for something similar to what you're looking at. I would try to find a deal where you can ask the seller to pay all or at least part of your closing costs, make a better priced offer if you have to to compensate for asking for the sellers to pay your closing costs.

How much do you pay for closing costs?

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