Are these closing fees too high?

Question

I am a first time investor and am purchasing an investment property in Baytown Texas for $200,000 (single fam).  I was expecting the closing costs to be around 3% but they are closer to 7-8%.  Is this reasonable?  I am using guaranteedrate.com they quoted me an interest rate of 3.625% and my credit score fluctuates between 780-800.  First property purchase. Thank You.

Andrew Postell · Answer

@Regan Coakley thanks for posting and just a coincidence I guess.  Always great to hear from a fellow Texan.  Bigger Pockets does have some good state specific forums and Texas is their most active forum.  Feel free to post there if you ever need some more "local" advice about things.

What we cannot see here is what your purchase contract states.  In your offer it would have been negotiated who is paying for what....meaning, who is paying for the title insurance - you or the seller?  So if the seller is paying, then that title insurance charge below won't be your responsibility.  But your contract might say that you are paying it.  Same with the survey fee.

Also, while your paperwork seems to show a charge for the full property taxes, that will not be the case...because the seller is responsible for their portion of the property taxes.  Basically, they pay the property taxes up until the day of closing...the day you have ownership.  Once you own the property, then you will be responsible for the remaining portion of the year of property taxes.  So while they are required to collect a full year of property taxes you won't be paying that entire amount.

So ask your loan officer to update these fees based on your purchase contract and that should help you with making your fees more accurate. Hope this helps but feel free to ask anything else if you need.

Bruce Lynn · Answer

Do the 7-8% closing costs include prepaids?   Some of that could be the difference depending on what you are paying for insurance...also are you or the seller paying for survey and title insurance?

Are the lender fees what they promised....for underwriting, processing, appraisal, etc.

guaranteed rate is normally pretty good on fees, but there may be charges that are out of their control.

Bruce Lynn · Answer

My main lender Keller Mortgage doesn't have origination fees, underwriting fees, application fees, etc...so some of that sounds high to me.  In fact they normally have no lender fees.   Your option probably to pay points, so you could eliminate that.  $850 for appraisal sounds high to me....that's highest one I've seen, so not sure if that is normal for your area or not or if you paid a rush fee or not.   Appraisal fees do seem to be getting higher.

Looks like you have offered to pay much of the closing costs, including some that has traditionally been paid for by the seller, so as HOA transfer fees, survey, and title insurance.  We do see some buyers picking these up now, so just depends on your market and what you have to do to get the contract.

This looks like lenders estimate to me....so they like to be safe and estimate high.  Maybe some of this is different based on your contract or actual closing statement.

Regan Coakley · Answer

This is the breakdown

Loan Costs

A.

Origination Charges

$1,782

0.325 % of Loan Amount (Points)

$492

$150

Application Fees Lender Fees

$1,140

B.

Services You Cannot Shop For

$1,044

Appraisal Fee

$850

Attorney Review Fee (TX only)

$150

$13

Credit Report Undisclosed Debt Report

$31

C.

Services You Can Shop For

$2,699

HOA Transfer Fee

$150

Resale Package

$300

Survey Fee

$539

Title - Document Preparation Fee

$50

Title - Escrow Fee

$425

Title - Guaranty Assessment Recoupment Fee

$2

$130

Title - Lender's Endorsements Title - Lender's Title Insurance

$1,103

D.

TOTAL LOAN COSTS (A + B + C)

$5,525

Other Costs

E. Taxes and Other Government Fees

$156

Recording Fees and Other Taxes Transfer Taxes

$156

F. Prepaids

$1,651

Homeowner's Insurance Premium (12 months)

$1,200

Mortgage Insurance Premium (

months)

Prepaid Interest ($15.0462 per day for 30 days @3.625 %)

$451

Property Taxes (

months)

G. Initial Escrow Payment at Closing

$7,150

Homeowner's Insurance

$100.00 per month for 4 mo.

$400

per month for

mo.

Mortgage Insurance Property Taxes

$562.50 per month for 12 mo.

$6,750

H. Other

$0

I. TOTAL OTHER COSTS (E + F + G + H)

$8,957

J. TOTAL CLOSING COSTS

$14,482

D + I Lender Credits

$14,482

Regan Coakley · Answer

@Bruce Lynn it does include pre-paids.  Thank you.

Regan Coakley · Answer

@Bruce Lynn Thanks for the insight.  Much appreciated!

Are these closing fees too high?

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