Closing costs are 14K on a 120K house?? Am I being cheated?

Question

Hey all,

Hi all, I put in an offer on a house in Baltimore City and it got accepted. I decided to go 119K with no seller assist, thinking that closing costs would run me at most 5-6% of the property.

According to my lender's estimate I'll have to pay 14K out of pocket which seems too high. My down payment is 5% which is ~6000.

I've attached my lender's loan worksheet that details all the costs.

Justin Lanciault · Answer

.5% is better than 3%. To be honest they are not helping you, that's the compensation being offered to bring a buyer. Typically between 2.5% - 3% on most sales.

The listing brokerage is paid 5 - 6% by the seller. Then the listing agent decides how to split it. Then the cooperating brokerage (where the buyer's agent comes from) gets what ever the amount is, say 2.5 - 3% and that goes to the buyer's agent. Of course there are splits, and this varies by brokerage.

Your agent knew this.

Justin Lanciault · Answer

Did your agent tell you why you had to pay a 3% commission to him? It's not unheard of, but that's usually part of the seller's fee.

Ask for the MLS printout with the commission showing.

Steve Vaughan · Answer

Wait. I thought agents say their services are free when we buy?  NOT!

To get the true loan costs, we have to separate down payment, pre-paids (like interest <30 days, property taxes, hazard insurance) and escrow/title fees from the total.

In a neutral or buyer-slanted market, closing cost help from the seller can be obtained.  If you couldn't negotiate for any help, what did your agent even do?

Sorry so many new folks think they only pay the down payment when they buy. BP has a tenancy to float over trivial details like that. Cosing costs excluding agent fees and pre-paids usually run about 2% when we buy, 3% when we sell.

Asish Balu · Answer

Good news, I talked to my agent. Turns out the seller is paying 2.5% of the 3% commission, so I only have to pay the remaining 0.5%. Today, I learned that seller assist is separate from "Buyer agency commission paid by seller". Even though I asked for zero seller help, they still paid for some of my agent commission since that was part of the MLS listing.

Joe Splitrock · Answer

@Asish Balu generally you look at cash needed to close in three categories:

Down Payment

Closing Costs (Origination fee, Appraisal, Credit Report, Underwriting, Doc Prep, Closing Services, Title Policy, Survey, Recording Fees, Home Inspection)

Prepaid Expenses (Insurance, Tax)

It sounds like you are confusing cash needed to close with closing costs.

I just got my settlement statement on a property I am buying for $225K with 25% down so financing $167K. My non owner occupied rate is 4.875% so your interest rate is not great for owner occupied. People are getting 4% to 4.25% currently for owner occupied with good credit and decent down payment.

All my fees are similar to yours, minus the origination fee which is $0 for me and yours is $565.25.

Seth M. Jones · Answer

This is all completely normal... the only things that are really true lender fees are the origination fee and underwriting fee. These fees are junk fees, but lenders often use both of those fees to increase profit a bit in order to offer you a better rate... I'd challenge the lender on both of those to individual fees, and get another quote. That being said, everything else is completely normal.

Michael Ealy · Answer

Asish,

Your subject line is misleading. Your closing cost is NOT $14K. That's the money you need to bring to closing. You are not being cheated. Your closing cost is about 6% of the purchase price which is in line with your expectations. You are being charged pro-rations on property taxes and insurance, and additional 2 months are being escrowed as well.

The only thing high is the underwriting fee of the lender so your other option is to shop around for another lender. On the other hand, the origination fee that your lender charges is only 0.5% which is very reasonable. Your third option is to renegotiate the deal and ask for a buyer's credit but you risk losing the deal.

Asish Balu · Answer

Makes sense. My mistake was believing that when people said closing costs are about 5-6%, it included everything like agent commissions and escrow.

Justin Lanciault · Answer

This is all standard, but if you can get it down go for it!

Your EMD was 1190. Your cash to close is 14k. Cash to close = closing costs (6k) + escrow (3k) + down payment (6k) - EMD. Should equal 14k.

Sorry you have to pay buyer commission, that sucks, but your agent and lender should of walked you through this.

Jay Hinrichs · Answer

taxs are tax's title isnruacne is title insurance   fire insurance is fire insurance..

credit pull is high

try to negotiate.

Closing costs are 14K on a 120K house?? Am I being cheated?

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