$12,400 closing costs for $129,900 property?

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$12,400 closing costs for $129,900 property?

Member since 2019 · 39 posts · 29 votes

I'm currently under contract for a turn-key investment property in Baltimore City that is valued at $129,900. I just received the documents from my lender showing total estimated closing costs of $12,400, making the estimated cash to close $38,400. I am putting down 20%.

$8,200 closing costs

$3,600 prepaids

The interest rate is 5%, almost $4,000 origination charges. I feel like it is too much? Should I look for another lender?

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Marcos Torres

Northern NJ · Member since 2017 · 38 posts · 18 votes

holy hell. Rate is crazy high as well as those costs. shop around. try credit unions

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Al Pat
Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
6y
@Ethan Kramer with current rates, what you got @5% is extremely high. Origination fee should be no more than $1200 but at best $900.
2 Reply
Dan Gamache
Lender · Boston, MA · Member since 2019 · 417 posts · 150 votes
6y
@Ethan Kramer If you are going with/qualify for a full documentation loan then these costs seem to high. If you are going with a commercial/private lender that doesn't require income documentation etc, than this pricing is not too out of line. In fact getting 5% rate at 80 LTV is really good. A lot of these lenders are setting aside 3-6 monthly payments at closing, so check to see if that is the case because that is not closing costs & you wouldn't have a payment for 3-6 months.
1 Reply
Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
6y
@Ethan Kramer

When you use a broker - you are paying them to find you the best mortgage available to you.

A) It doesn't seem like he is doing that job if he is getting you a rate at 5% based on your score.

B) If you interview 3-4 local banks and work with them directly, your loan origination fees will be in the $750 to $1,250 range.
C) Why are you paying for insurance and insurance premium. Is this an FHA loan?
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Toni Mo
Accountant · Worcester, MA · Member since 2020 · 30 posts · 14 votes
6y
Are you doing a residential or commercial loan for the property? Rate and closing costs are both too high. If resi ask for the TILA disclosure and see what they are charging you so much for. Shop around for a rate try a local community bank or a credit union.
0 Reply
Bonnie LowPro Member
Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
6y
That does seem high. I'm currently closing on a loan of $256,000 (residential owner occupied) at 3% and my closing costs are very similar to yours.
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George Munoz
Real Estate Agent · Fort Lauderdale, FL · Member since 2018 · 360 posts · 213 votes
6y
I think Lender is trying to secure some points upfront and providing you lower interest so that you can get more cashflow. that's my assumption ... is it 5% annually or he is charging you 5 points upfront plus extras? if thats the cas thats like too much.. Whats the cashflow by the way?
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Ethan Kramer
OP
Member since 2019 · 39 posts · 29 votes
6y
UPDATE: I talked to a mortgage specialist from WellsFargo and I was able to secure a 3.25% interest rate and 15 years at 25% down payment with zero origination fees. Only around $195 per month more than the 30 years term at 4% interest rate, so I decided to go with 15 years, especially that the property will rent at around $1,500 per month. So glad I asked you guys, it is truly important to shop around!
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Ethan Kramer
OP
Member since 2019 · 39 posts · 29 votes
6y
Originally posted by @Sarah 'Sadika' J.:
@Ethan Kramer that’s too high. I’m buying a house in Baltimore and it’s $240K with 12K closing.
Wellsfargo is offering 3.5% for investment properties.

Because of your comment, I visited a WF branch and got a 3.25% interest rate, 15 years, and zero origination fees at 25% down payment. Thank you, Sarah!
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Ethan Kramer
OP
Member since 2019 · 39 posts · 29 votes
6y
Originally posted by @George Munoz:
I think Lender is trying to secure some points upfront and providing you lower interest so that you can get more cashflow. that's my assumption ... is it 5% annually or he is charging you 5 points upfront plus extras? if thats the cas thats like too much.. Whats the cashflow by the way?

I told the initial lender the numbers I got from WellsFargo and the lender said he wouldn't be able to beat that.
About $885 per month on PITI (3.25% at 15 years) and $1,500 rental. It is about $200 more than the 30 years term, so I went with 15 years.
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Steve Smith
Member since 2020 · 217 posts · 167 votes
6y
Ethan,
Sounds good. 3.25% is a great rate for an investor. (0% is a bit better....). But you'll have cash flow and overtime, hopefully this will prove to be a good investment.

However, after you've financed 4 or 5 properties with banks, they cut you off. And regardless they always dictate the rates and terms. And today they beat you to death with paperwork. Last time I checked they even wanted tax returns!

I haven't been to a bank to buy property in years, and just don't do that. PITA. I remember years ago on a few refi properties, they would send you the paperwork, and you'd have a notary come out to witness the signing, and they'd send you a check. Boy, did I have fun rewriting the docs to "my" specifications. I think those days are gone.

Seller financing makes a much better choice. A bit hard in some markets but it's there. I recently signed a purchase agreement for w $400K waterfront condo for $25K down, seller financing at 0% for 6 months, and taking title subject to an underlying mortgage. Backed out because I just didn't like the condo docs. WAY to restrictive. But it would have been a good deal for someone who likes condos. But the deals ARE out there.

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Justin Elliott
Investor · Minneapolis, MN · Member since 2016 · 145 posts · 108 votes
6y
I'm usually at 3% closing costs.
0 Reply
Antwoine McCoyPro Member
Real Estate Consultant · Washington, DC · Member since 2017 · 15 posts · 16 votes
6y
@Ethan Kramer definitely high. Contact Michael Bogar of Mid America Mortgage or Katie Simmons Hickey of Caliber Home Loans

On an investment property ($597K) refi 3 years ago I paid 1.875 Origination fees and 4.875 interest rate with Caliber with a 709 score. And that was a cash out refi of a multi unit property. Why are they charging you 2 whole points?
0 Reply
Andrew P.
GA · Member since 2017 · 35 posts · 29 votes
6y
Just closed a $145k loan here in GA with 20% down 3.5% interest and $6000 in closing including pre-paid. Shop around.
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