Conventional Loan Closing Costs - Analysis
I want to start by saying that this is my first deal. This question serves two purposes, to educate myself and to allow others to get valuable and transparent information on closing costs of conventional loans for investment properties.
I’m disclosing the fees on the loan estimate I’ve received from a mortgage brokerage company in Michigan. My business partner and I have made a 65K offer on a 2bd/1ba in the Detroit Metro area. The offer has been accepted. Now we’re dealing with the financing part of the process. Below is some information on the borrowers and the closing costs.
The loan closing costs seem high to me. We're strong borrowers with decent incomes. Please provide constructive feedback if you are able to or upvote if you think this is valuable for other investors.
Borrower 1:
Credit score 775
2017 income of 80K
no debt, no bankruptcy
Borrower 2:
Credit score 750
2017 income of 60K
2K in credit card debt, no bankruptcy
Loan:
- 30 year
- fixed rate
- conventional
- 13K down payment (20%)
- We got approved for a 5.375% interest rate <—— Does the interest rate seem fair or too high?
Total closing costs in Loan Estimate:
$2,977 in Loan costs <=== Are the loan costs too high for such a small loan? Breakdown below
$2,330 in other costs
$13,000 in down payment
($531 in lender credits)
--------------------------------------
$17,776
Here is a breakdown of the closing costs aside from the down payment:
LOAN COSTS EXPLANATION ($2,977)
A. Originator Compensation
% of loan amount (points) $1,430
B. Services
Appraisal fee $455
Credit Report $59
Flood Certification $8
C. Other Services
Title - premium for lender coverage $450
Title - settlement or closing fee $575
OTHER COSTS EXPLANATION ($2,330)
D. Recording Fees and Other Taxes/Transfer Taxes $70
F. Prepaids
Homeowners Insurance Premium (12 months) $750
Prepaid Interest $130
G. Initial Escrow Payment at Closing
Homeowner’s Insurance $188
Property Taxes $947
H. Real Estate Commission $245