I'm closing on my first SFR - $50k, 20% down, Memphis
This is through Roofstock and I'm getting the loan through one of their preferred lenders.
I'm new to this and after looking at the breakdown of closing costs, I'm little confused.
Here are some of my questions. I'm a newbie, so please forgive my ignorance.
1. Appraisal - quoted at $750. I did some quick searches and it looks like the average should be around $300-350. Lender says appraisals for rental property is higher because of additional reports the appraiser has to include.
2. Homeowners Insurance- I'm already getting quotes from insurance companies, so why would I pay for insurance through my lender without even seeing what the policy is? It's broken up my insurance premium (12 months) and insurance (3 months).
3. Property taxes - why am I paying this upfront in closing to the lender rather than directly to the government?
Thanks in advance for helping me out,
Appraisal does seem high. In regards to taxes and insurance those are prepaid and put into escrow up front.
Typically you pay insurance for the full year upfront
Property taxes are usually taken up front to front load the escrow account as a part of servicing the mortgage. It’s normal for the servicer to pay the tax and insurance to the appropriate parties through the escrow account rather than the homeowner when you have a mortgage on the property.
Closing costs are always high relative to purchase price for the baby transactions. Things do not scale up and down in a linear manner.
For 2 and 3, ask your lender if you can waive impounds. With 20% down, you should be able to.
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