Question about including prepaid insurance in calculations

2 Replies

Hello,

When plugging in #s into the "purchase closing cost" section of the BP rental calculator, you can click the "cost breakdown" link on it to plug in specific components (e.g. points, taxes, hazard insurance, etc.).

The loan quotes I've received all include 12 months of prepaid hazard insurance. But if I'm including a year of insurance as an up front closing cost, when I get to the expenses section of the BP calculator and I'm plugging in another $75 estimate for monthly ongoing insurance costs, aren't I effectively double counting my insurance costs for the first year? 

One other question: the BP calculator says that I should estimate $1500 - $2500 for closing costs, but I've received 4 quotes from different lenders and for a loan with 0 points, their closing costs all come in between $3800 - $4500 (plus an additional ~$2300 for prepaid expenses). Are the quotes I'm receiving just not that competitive or am I missing something here? I received these quotes from a mix of small to larger sized lenders in TN.

Thank you!

@Daniel Soovajian since you pay insurance for the following year, it's not counted double. You're paying upfront for one year, and then saving $75/month until the next bill is to be paid. As far as your closing costs, they are high for 0 points. The lender should be able to give you a breakdown of costs but it should be less than $2k if no points are being paid.

Appreciate the response Jason - makes sense now re: the prepaid insurance.

Now I'm trying to get a sense of where I might be getting overcharged on the closing costs...I listed out quotes provided by two companies - quotes for one company vs. the other are separated by "vs":

Lender Related charges

- Appraisal fee - $475 vs $450

- Credit report fee - $21 vs. $60

- Flood certification - $8 vs $14

- MERS - $12 vs $14

- Processing fee - $400 vs. $450

- Tax service fee - $94

- Underwriting fee - $695 vs. $950

- Government recording fee - $180 vs. $115

- State tax / stamps - $923 vs $680

TOTAL: ~$2800 for either lender

Title charges

- Title expenses (e.g. closing fee, title insurance, etc.) - $1580 vs. $1450

I think I might be getting tripped up on what I'm counting as a "closing cost". When you say a lender should be able to come in at less than $2000 if no closing costs are involved, are you talking only about the lender related expenses (and therefore you're not including prepaid expenses and title charges)?