You might want to give the price of the property and what the closing cost breakdown are. Many costs are going to be within a range and have no correlation to the price of the property. If you purchased a property for $1 for instance, your closing costs would be tens of thousands of percent.
Is this a standard conventional loan or a private long term loan you are getting? Also what market are you buying in?
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Looks legit and reasonable. In CA one investor paid $1 for a parcel of land that one can not built at auction. He was more interested in the $1000 realtor commission. The closing the cost is similar if more. Whether it is a buck or 55K the closing cost is fixed.
Everything you list is pretty standard. The loan origination charge is kind of high. I paid 1500 on my first one and thought that was too high and haven’t paid close to that since. The second one waived their lender fees for me (special promotion at the time).
Also your appraisal is kind of high too but not my much. Most of my appraisals have been about 500 five or take a hundred bucks.
Finally the percent to loan amount value is largely irrelevant in my experience. If you’re buying a single family home in the 70-200k range it’ll probably be 5k closing costs per transaction.
My closing costs on two different properties with values nearly double of one vs the other were essentially the same.
Originally posted by @Chris Ono :
We're looking to purchase 2 turnkey properties from Memphis Invest, but the mortgage company that was recommended (not by them, but they work with them regularly) is charging 10.1% to purchase price in closing cost. Most of what we're finding is an expectation of 4-6%.
Are we misunderstanding something or does this seem outrageous?
Thanks for reading.
Closing costs do not scale up and down in a linear fashion with purchase price. For example the appraisal fee on a $100k property is not 1/5 the cost of an appraisal fee on a $500k property. So that appraisal fee in itself, which is often the smallest closing cost of all, might be 1% of the sales price of a $50k property, but a trivial fraction of a percent of a $500k property. Escrow services also do not scale up and down -- looking up the title history of a $50k property takes just as much work as looking up the title history of a $2m property.
Thanks everyone. I was going off of how the proforma calculated the closing cost, but it seems irrelevant. Root cause of concern is looking as though the proforma's closing cost vs. actual being over double. Appreciate all the responses.
Pro forma should only be considered accurate for hard costs such as insurance, taxes and debt service, and then you should also confirm those costs yourself. Then on top of that you should add vacancy, maintenance and capex costs. If after all that it still looks good, then go for it.
Closing costs as a percentage of purchase prices makes zero sense. It will never be accurate and I’m guessing it’ll always be low. Closing costs are always around 5k unless it’s commercial or something else besides a single family with conventional 20 percent down.
Yes I got that, but thank you.
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