why closing cost is so high?

Question

Soon closing on a property property cost $458k and the closing cost is really high we are doing FHA mortgage they are charging 2% of the loan plus application fee and mortgage insurance on closing for the amount of $7k and plus monthly mortgage insurance... in 2020 there was not just a thing 2% of the loan on mortgage origination loan fee!

Now total closing cost is 26k and my closing is soon, i am just feeling uneasy about this? is this normal for todays market? can someone give me some clarity ?

Jon Puente · Answer

Hey Tom,

FHA loans have Upfront Mortgage Insurance that is 1.75% of the loan amount.  They also have monthly mortgage insurance on the payment.  You cannot get around this unless you change to a Conventional loan.

As for the 2% origination fee, that is most likely what your loan officer is making, which is not good nor bad, just depends on the situation.  I would look on your loan estimate to see if you are getting any lender credits (Section J) to help offset their 2% fee.  When I structure a loan, I try to give as much lender credits as possible to help the client lower closing costs.

Your job is to find or ask about lender credits.

Brittany Minocchi · Answer

Your loan officer has more information than anyone here and they should be earning that 2% and explaining the numbers to you. FHA loans will have mortgage insurance no matter which lender you go to, it's a feature of an FHA loan. Not all lenders have application fees. Origination fees were in existence in 2020, but whether or not you see them on a loan estimate depends on how a loan is structured. Your only option may be to have it structured that way in order to get the loan approved and/or to pass compliance.