topic Re: Closing cost seem high? in Mortgage Loans

Closing cost seem high? UPDATE

rosco75 — Wed, 03 May 2023 22:37:23 GMT

Hi guys,

I am set to close in May and have a ratified contract that i am reviewing. Im having difficulties understanding these costs and why the closing costs are so high, or maybe i just do not know how to interpret? Its a VA loan and I had planned on putting 10k down. 5.5k is already in the earnest account. Am I offbase here?

Re: Closing cost seem high?

VAMortgageGuy — Tue, 11 Apr 2023 15:09:03 GMT

For the rate quoted, the costs are reasonable. In some states the transfer taxes are either paid by the seller or split between the seller and the buyer so there is a chance your closing costs will go down.

Re: Closing cost seem high?

CreditFun — Tue, 11 Apr 2023 15:35:25 GMT

It's hard to tell.

What's your rate?

Are you using a lender or a mortgage broker?

Mortgage brokers on borrower paid compensation are capped at 1%, while lender paid compensation is 2.75%.

Lenders can get compensation up to about 5% on the backend.

See if you can find a mortgage broker that will do the deal for 1% borrower paid compensation. In that scenario the rate will be super sharp.

Re: Closing cost seem high?

NC_Mtg_Loaner — Tue, 11 Apr 2023 15:36:38 GMT

Do you have the ability to lock the rate without having to pay any discount points?

IMO, in this market it's crazy to pay points to buy the rate down when rates are artificially still too high (thanks to the FED's inability to fight inflation along with Congress' willingness to give money away) because when rates return to normal you will be able to conduct a VA IRRL which typically only costs you .5% of the loan but allows you to finance it.

SO I'd compare the cost and monthly payment difference of a zero discount point rate loan term for about 12 months to see if it's more than $2750.

Re: Closing cost seem high?

CreditFun — Tue, 11 Apr 2023 15:40:41 GMT

I wouldn't say they are artificially high.

The spread is there because market makers think long term rates are going higher before going lower.

If the fed sees through the job report and acknowledges that higher paying jobs are being replaced with lower paying jobs, then rates could go lower.

However, last summer, Powell said he wants 10% unemployent and 20% retreat in real estate prices. If this means across the board, he has a lot more rate hiking to go.

That said, lock the rate you are happy with and can live with.

Re: Closing cost seem high?

ShanetheMortgageMan — Tue, 11 Apr 2023 17:09:53 GMT

@CreditFun wrote:
What's your rate?

Are you using a lender or a mortgage broker?

Mortgage brokers on borrower paid compensation are capped at 1%, while lender paid compensation is 2.75%.

See if you can find a mortgage broker that will do the deal for 1% borrower paid compensation. In that scenario the rate will be super sharp.

On the right side of the LE under interest it's being charged at 5.750% so I assume that's the interest rate. The 1% origination fee indicates to me that OP is probably using a mortgage broker going borrower paid compensation as well, since mortgage lenders typically don't charge origination fees and would charge discount points to buy down the rate instead. Depending on the credit score a 5.750% rate costing 1 point could be reasonable. With excellent credit might be able to get that rate about .250% lower.

Re: Closing cost seem high?

rosco75 — Tue, 11 Apr 2023 17:26:41 GMT

@ShanetheMortgageMan wrote:
@CreditFun wrote:
What's your rate?

Are you using a lender or a mortgage broker?

Mortgage brokers on borrower paid compensation are capped at 1%, while lender paid compensation is 2.75%.

See if you can find a mortgage broker that will do the deal for 1% borrower paid compensation. In that scenario the rate will be super sharp.
On the right side of the LE under interest it's being charged at 5.750% so I assume that's the interest rate. The 1% origination fee indicates to me that OP is probably using a mortgage broker going borrower paid compensation as well, since mortgage lenders typically don't charge origination fees and would charge discount points to buy down the rate instead. Depending on the credit score a 5.750% rate costing 1 point could be reasonable. With excellent credit might be able to get that rate about .250% lower.

Correct - my rate is 5.75% with a credit score used for calculation of 688

I think im working with a broker. I was never offered any buy downs for points or whatever, but they did provide me with a document that outlines how that works. Does that mean I have the option to buy down my rate?

I am not sure how to determine if I am able to do any of this. And it was not clear what, if any, costs are covered by my funds in earnest, or if my downpayment later will be applied to the loan? This reads as if I am financing the entire cost of the house, but I am not. Wouldnt that change my payment and such?

Re: Closing cost seem high?

ShanetheMortgageMan — Tue, 11 Apr 2023 19:54:45 GMT

@rosco75 wrote:
Correct - my rate is 5.75% with a credit score used for calculation of 688

I think im working with a broker. I was never offered any buy downs for points or whatever, but they did provide me with a document that outlines how that works. Does that mean I have the option to buy down my rate?

I am not sure how to determine if I am able to do any of this. And it was not clear what, if any, costs are covered by my funds in earnest, or if my downpayment later will be applied to the loan? This reads as if I am financing the entire cost of the house, but I am not. Wouldnt that change my payment and such?

You can ask your loan officer if you can buy down your interest rate, you should have the option to do so. To determine if it's worthwhile you'll divide the monthly savings of the lower interest rate payment into the amount of discount points, which will be your "breakeven" point on how many months you'll need to be in the mortgage in order for the total savings to exceed the amount of discount points you paid at closing.

The earnest money deposit is first applied towards your down payment (if any), then to any closing costs the seller isn't giving you a credit for, and then finally anything remaining is refunded back to you at closing.

The first page of your Loan Estimate is missing, which indicates the sales price and the new loan amount. However if you do the math in the lower right corner ($16,745 in closing costs minus $5,500 deposit minus $1,735 seller credit = $9,510 remaining to be paid by you) it seems like the loan amount is the same as the sales price (which you seem to explain isn't what you want to do). If you'd like to put money down/finance less, then you can request your loan officer to change the loan amount and ask for a new Loan Estimate to be disclosed to you.

Re: Closing cost seem high?

MortgageMama — Tue, 11 Apr 2023 20:28:44 GMT

Please post Page 1 of the Loan Estimate? There are some details there that would be useful. Please redact your name and address, but provide the State and County info? Also, I'm not seeing property taxes in Section G. Generally, you will be loading up your escrow account to pay taxes going forward. Lastly, unless you are excempt from the VA Funding Fee, that should be listed in Section B.

Re: Closing cost seem high?

rosco75 — Wed, 12 Apr 2023 14:37:18 GMT

@MortgageMama wrote:
Please post Page 1 of the Loan Estimate? There are some details there that would be useful. Please redact your name and address, but provide the State and County info? Also, I'm not seeing property taxes in Section G. Generally, you will be loading up your escrow account to pay taxes going forward. Lastly, unless you are excempt from the VA Funding Fee, that should be listed in Section B.

There are no property taxes because I am a 100% P&T disabled Veteran. It is in Albemarle co Virginia. Same with the funding fee, I believe I am exempt. Here is sheet 1.

I just feel like closing costs are far above what was discussed with my realtor and with others who have purchased homes whom ive spoken to. Or maybe this is normal I guess lol

Re: Closing cost seem high?

NC_Mtg_Loaner — Wed, 12 Apr 2023 15:12:35 GMT

Are you able to obtain a loan without having to pay 1% in discount point fees at Origination?

Some lenders can offer a slightly higher rate in order to waive that 1% fee.

Re: Closing cost seem high?

rosco75 — Wed, 12 Apr 2023 18:24:59 GMT

@NC_Mtg_Loaner wrote:
Are you able to obtain a loan without having to pay 1% in discount point fees at Origination?

Some lenders can offer a slightly higher rate in order to waive that 1% fee.

I was actually offered this from another lender. This is what he sent me:

"The reason for the high costs are because they are charging you $5,500 to get the rate of 5.75%. I can do the exact same rate but charge you around $3,400 which saves you $1,100. OR I could do 6.25% and there are no charges for the rate. Botha re attached so we can discuss. The difference in payment between the two options I am proposing here is $177 and the difference in cost is $3437, so the break even is 19 months. (3437/177). Let me know when it’s a good time to chat and we can go over this in detail."

I do not see the benefit of taking a 6.25% rate to save $5500 in closing costs. Does not seem logical to me. Or am I understanding this wrong?

Re: Closing cost seem high?

MortgageMama — Wed, 12 Apr 2023 20:31:15 GMT

Same rate and 1,100 less out of pocket sounds good. Make sure this other lender meets your expectations with knowledge and experience!

Re: Closing cost seem high?

VAMortgageGuy — Thu, 13 Apr 2023 19:40:11 GMT

@rosco75 wrote:
@NC_Mtg_Loaner wrote:
Are you able to obtain a loan without having to pay 1% in discount point fees at Origination?

Some lenders can offer a slightly higher rate in order to waive that 1% fee.
I was actually offered this from another lender. This is what he sent me:

"The reason for the high costs are because they are charging you $5,500 to get the rate of 5.75%. I can do the exact same rate but charge you around $3,400 which saves you $1,100. OR I could do 6.25% and there are no charges for the rate. Botha re attached so we can discuss. The difference in payment between the two options I am proposing here is $177 and the difference in cost is $3437, so the break even is 19 months. (3437/177). Let me know when it’s a good time to chat and we can go over this in detail."

I do not see the benefit of taking a 6.25% rate to save $5500 in closing costs. Does not seem logical to me. Or am I understanding this wrong?

You also need to make sure the 2nd lender isn't charging processing and or underwriting fees since the first lender was not.

Re: Closing cost seem high?

rosco75 — Fri, 14 Apr 2023 14:45:59 GMT

@VAMortgageGuy wrote:
@rosco75 wrote:
@NC_Mtg_Loaner wrote:
Are you able to obtain a loan without having to pay 1% in discount point fees at Origination?

Some lenders can offer a slightly higher rate in order to waive that 1% fee.
I was actually offered this from another lender. This is what he sent me:

"The reason for the high costs are because they are charging you $5,500 to get the rate of 5.75%. I can do the exact same rate but charge you around $3,400 which saves you $1,100. OR I could do 6.25% and there are no charges for the rate. Botha re attached so we can discuss. The difference in payment between the two options I am proposing here is $177 and the difference in cost is $3437, so the break even is 19 months. (3437/177). Let me know when it’s a good time to chat and we can go over this in detail."

I do not see the benefit of taking a 6.25% rate to save $5500 in closing costs. Does not seem logical to me. Or am I understanding this wrong?
You also need to make sure the 2nd lender isn't charging processing and or underwriting fees since the first lender was not.

The second worksheet is even harder to understand than the first. (to me)

Re: Closing cost seem high?

ShanetheMortgageMan — Fri, 14 Apr 2023 16:56:49 GMT

The 2nd lender is charging an admin fee of $700 + processing fee of $595 as their standard fees, plus a tax service of $81 and a verification fee of $185, plus finally the discount point cost of $3,437. All that totals up to $4,998 which is about $500 less than the first lender who is just charging a flat $5,500. Still less, but it's not the $1,100 savings the loan officer initially was saying.

All the other fees listed as controlled by 3rd parties, so while those other fees are estimated differently, at the end it should be the same no matter which loan officer you end up going with.

I noticed property taxes aren't listed on either of them, are you going to be exempt from having to pay property taxes?

Re: Closing cost seem high?

rosco75 — Fri, 14 Apr 2023 17:41:51 GMT

@ShanetheMortgageMan wrote:
The 2nd lender is charging an admin fee of $700 + processing fee of $595 as their standard fees, plus a tax service of $81 and a verification fee of $185, plus finally the discount point cost of $3,437. All that totals up to $4,998 which is about $500 less than the first lender who is just charging a flat $5,500. Still less, but it's not the $1,100 savings the loan officer initially was saying.

All the other fees listed as controlled by 3rd parties, so while those other fees are estimated differently, at the end it should be the same no matter which loan officer you end up going with.

I noticed property taxes aren't listed on either of them, are you going to be exempt from having to pay property taxes?

Hmm, ok that makes sense. Not sure where he got those savings then. And I have come to understand that most of these are "estimates" so I guess toward closing I get a better idea.

Also - yes I am exempt from property tax as a 100% P&T disabled veteran.

Re: Closing cost seem high?

ShanetheMortgageMan — Fri, 14 Apr 2023 18:10:00 GMT

They were just comparing the origination vs. discount fee, nothing else. So if you just compare those two, then yes there is the savings initially mentioned but it's not the only fee that lenders charge. The total difference isn't incredibly significant in my opinion, so between the two I'd go with whichever loan officer has been better at communicating and you'd feel more confident with.

Re: Closing cost seem high?

VAMortgageGuy — Fri, 14 Apr 2023 18:17:10 GMT

I would go with the first lender.

Also a heads up. The 2nd lender has verification fee of $185.

VA prohibits lenders from charging Veterans a verification of employment fee.

Re: Closing cost seem high?UPDATE

rosco75 — Wed, 03 May 2023 22:32:20 GMT

Hello all! Thank you for all the guidance thus far during this process. I wanted to give you guys an update and ask if I am offbase in questioning something.

A few weeks ago, I questioned the 1% origionation fee and how things that were typically included in that fee were outlined seperatly. This is the email that i sent the mortage lender:

Good afternoon XXXX,



I apologize – the day has been super busy for me. I apologize for the questions, as I am only able to briefly look over things in increments.
 I did have 1 question that pop’d out in my mind. I did want to put down another 5k but I also see that you guys charge the
 appraisal fee / credit report fee / flood cert separately than included inside the origination costs. Is this typical? 
It was my understanding that these were a part of that cost. I also forgot to mention that I found a title settlement company, and 
they should be reaching out to you for their associated cost, which should change those numbers as well.

I have been asking for a new worksheet with updated numbers because this is the respponse that I got from the lender:

Hello rosco75,

No problem at all!  Yes, there are 3rd party fees that you will incur for the credit report, appraisal, flood certificate, etc. 
These all fall under “origination charges”.  These are all required by the VA and there will be an invoice for each one of them.
Most lenders charge an additional 1% origination fee but we have waived that for you. 

Right now the fees are just estimates.  Please do have the title company reach out to me so we can place the order for your title insurance.
  I compliantly can not order it until we have your signed disclosures back.  Keep in mind that the documents do not obligate you to obtain financing.

Today I recieved an e sign with the updated financial worksheet, and the 1% origionation fee of $5500 was still on there. Am I off base if I do not sign and ask for them to revise? Did I somehow misinterpret her meaning? Or did she tell me something she was not authorized to promise? Im confused because the additional 5.5k at closing is not something that I necessarily have budgeted for and I would rather not have to pull money from planned upgrades to cover this cost. Thoughts?

topic Re: Closing cost seem high? in Mortgage Loans

Closing cost seem high? *UPDATE*

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Re: Closing cost seem high?*UPDATE*

Closing cost seem high? UPDATE

Re: Closing cost seem high?UPDATE