Having a hard time making sense of "closing costs"

5 Replies

So, I'm looking at various loan options. See attached jpgs. I'm working on my first deal. I am talking to a local lender who was referred to me. We had a good meeting, and he is giving me different options. We broke them down and looked at itemized closing costs, and he sent me the breakdown, which I am looking at for one hypothetical loan.

I'm just getting overwhelmed trying to understand all this. Basically it's a 228k loan at 4% for 30 yrs. So it's 1088.51/mo. (hypothetical purchase price of 240k at 5% down). I have nothing to base the competitiveness of the closing fees on. Closing costs appear to be $5854.10, with reserves at $1109.98.

Total cash in with 5% plus closing costs = 18,964.08. Is it negotiable that the seller pay this? Or split it? What would you do?

Obviously I will follow up with this lender and continue to review, break it down, and look at other options since this is only hypothetical depending on the property. But I could use another set of eyes for now. Thank you for any guidance!

Are these fees all standard? Does this look good? Which fees seem high?

Every market is different, but in my market its not customary for the seller to pay the buyers loan origination fees or anything like that. The most the sellers will typically do here is prepaids and certain closing costs. 

I usually estimate 3% for closing costs in my market plus prepaids. The time to negotiate trying to get a seller to pay some is before you go under contract, sounds like you are already under contract. I usually try to wrape some anount into the loan by increasing the price and doing a seller subsidy. Nothing looks out of line in your estimate really. Appraisal seems a tad high to me, thats about it 

'Total cash in with 5% plus closing costs = 18,964.08. Is it negotiable that the seller pay this? Or split it? What would you do?'   It depends on your market.  In Nashville expect to pay all of your own closing costs and reserves, but, going further North to Clarksville, the Seller almost always contributes to the Buyer closing costs, up to 3% of the sale price, when we are not in peak buying periods.  If you lowball an offer and the Seller accepts the offering price, don't expect the Seller to contribute to your loan expenses.  It looks like your closing costs are running about 3% of the loan amount which is not bad at all.  3-4% is about the norm that I see as a Realtor.

Thank you all so much! I just learned a lot from your responses. This is a hypothetical property, no contract or anything. Just to get prequalified. I was really wondering if I should waste my energy and time micro-analyzing it line by line, or look at the total and be satisfied, which appears to be about 3% as you all mention. When I analyze it line by line my head starts to spin ("Is that one too much?" "Is this fee fair?" "Is that fee fair?"). I guess you can't really price shop as much on itemized fees. But if I can not worry about it line by line, then I can focus on more important things. Thank you!