I am looking at a deal currently on a $72,000 property, where the loan amount would be $57,600 (20%).
Everything looks good and the rate from the lender is 4.75%, which works well for me.
The closing costs are strangely high, though. Origination charges are $2,058 and the total (including origination) is $4965.10. This property is in Indianapolis.
Is this normal? It seems extremely high for me and I would just love to know what the lender is doing - if they are taking me to the cleaners or if the closing costs are all pretty standard and I won't be able to find a better deal elsewhere.
Also, if I SHOULD look elsewhere, how do I find a lender on my own?
Thanks so much!
Have the lender give you a Good Faith Estimate with the breakdown of all the costs. From there you can speak to him/her freely about each line and the cost. They should be able to explain it all, let them know youre concerned about the costs. 1 - 2% origination fee is about normal, try and find a lender that will only charge 1% origination. Plus about 1k for title insurance, $400 inspection, insurance escrow and youre already looking at a hefty amount. A lot of times the lenders over estimate the cost a little and you end up paying less.
What you should always do though is get a 2nd opinion. Compare the GFE from 2 different lenders, pick the one that suits you better. Thats what I always do.
Im working with a lender now for a property in Indy and Im satisfied with it. I can give you the contact info if you want so you can get a 2nd estimate.
Just PM me and ill send you the info.
@Dave Olverson that seems really high to me. Get a breakdown of those costs. My normal closing costs are about 1/3 of that. I have only done one closing in Indiana though, and it was cash. Is there a wholesaler fee in there by chance?
Thanks @Joel A. - I will PM you right after this. That's good to know that these might come in lower. I do think they may be over estimating a bit.
@Jerry W. - Thanks as well. There is no wholesaler fee included - I have the GFE and while the origination fee is around $2,000, the other settlement services include:
- Appraisal and Appraiser Management Fees ($550)
- Credit Report ($200)
- Flood Certification ($5)
- Government recording charges ($62)
- Title Services ($818)
- Title Insurance ($265)
- Escrow Deposit for taxes/insurance ($400)
- Homeowner's Insurance ($600)
That really kicks it up. So I guess the origination fee really isn't out of whack, just on the very high side. Due to my relationship with this lender, I don't want to nickel and dime them. I would like to keep a good relationship, so if most of this is on pieces out of my control, then so be it.
the origination fee is around $2,000 - that is almost a 4% origination fee. I would try and negotiate that down to 2%. Are you paying for points? To bring the interest down? That could explain that as well. But this is a really high origination cost in my opinion.
- Credit Report ($200) - that is way too high. Should be no more then $30. Typically $15. Talk to him/her about this. No way a credit report costs $200
- Appraisal and Appraiser Management Fees ($550) - this seems high too, most appraisals from what ive seen are $400. This might be one they are just overestimating.
Everything else seems about right.
They mentioned that they could knock $700 off the origination fee if I went up to 5.125% - which seems like a bad deal for me over the long run.
If the rest seems about right, I'm willing to eat a few hundred bucks on the origination fee.
It felt as though they were trying to be honest with me when they mentioned that to make it work on their end, for such a small loan, they needed a little extra in the origination fee. If that's all it is, then I am fine with it.
Let me know if I am being dumb with that logic.
Your logic seems okay. Youre paying for points to keep your interest rate lower so that also helps explain the high origination cost.
Do ask them about that $200 credit report though. Im sure they can shave that down. All else sounds about right.
Great - Thanks all.
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