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Closing Costs - any of these junk?

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PippiLongstockingWannabe
Valued Member

Closing Costs - any of these junk?

The BACKGROUND:

Just received my good faith estimate from my LO about what my closing costs may be.

 

I'm attempting to get a house via the USDA Rural Guaranteed Loan Program (although based on Shane's post this morning, I may be SOL already for now)

and have an accepted offer on a house. My inspection is this Sunday. The LO will schedule the USDA appraisal right after it if nothing critical is found in 

the inspection. 

 

I'm buying a shortsale but given the crazy ups and downs in the real estate market, hard to be confident that the property will appraise at higher than the accepted offer. 

I'm counting on it so that I can finance the closing costs into it. Sellers listed at least $100k above. But I've been reading some books for first time home buyers and one last night was cautionning against excessive/junk fees buried in closing costs that are simply padding the bottom line. 

 

THE QUESTIONS:

I'm looking at $8100 in c.costs on a $195k house. 

 

Which of these are padded (excessively high) or junk?

Processing Fee: 695

Underwriting Fee: 950

Closing/Escrow Fee: 737

Document Preparation Fee: 125

Notary Fee: 150 (actually this I know is about right, just wish my Dad was still a notary)

Title Insurance: 395 (I know this is an important one but is the cost right or should I ask to shop around?)

Loan Tie-In Fee: 195

Title/Escrow Fees PAD: 350 (Looks like this is just artificial pad to create buffer to reduce impact of unexpected higher costs?)

Recording Fees: 109

 

 

Also... hazard insurance premium? Is that normally part of the USDA program or mortgages? I don't recall hearing about that before but it's $65/mo. 

 

Thanks

 

 

 

5/13/08: EQ: 619 TU: 659 EX: 655
7/20/09: EQ: 647
8/13/09: EQ: 697 TU: 720
7/26/10: BOUGHT MY FIRST HOUSE
10/15/10: EQ: 741
2011: lost my job due to disability
2014: foreclosure but fighting it.
2015: House saved!

2022: zero cards,
Message 1 of 8
7 REPLIES 7
ShanetheMortgageMan
Super Contributor

Re: Closing Costs - any of these junk?

Processing fee is a bit high IMO, most normal ones are under $400.  The pad is what you figured out it is, it's there just in case more funds are needed than originally estimated so you won't have to race down and write a separate check just so your loan can fund.  Whether you can shop for title insurance depends on whose choice of closing/title services, if it's the sellers choice (which is often the case in California, not sure where you are) then you are almost always stuck with their company, if it's your choice then you should be the one picking it, not the lender.  Hazard insurance is just another word for homeowners insurance, and you decide who you are going to get homeowners insurance through.  I'd ask your LO to find out what their policy is with the lack of funds from USDA, if it's going to take a few more weeks than anticipated it's better to know right now than waiting until you are expecting it to go through and find out then.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 2 of 8
PippiLongstockingWannabe
Valued Member

Re: Closing Costs - any of these junk?

So the other three (of the first 4 I listed) are fine then?

 

I see from other threads that their numbers were lower for the Underwriting fee too but also isn't document preparation usually a padded fee?

5/13/08: EQ: 619 TU: 659 EX: 655
7/20/09: EQ: 647
8/13/09: EQ: 697 TU: 720
7/26/10: BOUGHT MY FIRST HOUSE
10/15/10: EQ: 741
2011: lost my job due to disability
2014: foreclosure but fighting it.
2015: House saved!

2022: zero cards,
Message 3 of 8
ShanetheMortgageMan
Super Contributor

Re: Closing Costs - any of these junk?

All the other fees are normal.  Some lenders have higher underwriting fees than others, usually the lesser known ones do.  Doc prep is being charged by the title/escrow company in your situation, very standard these days since docs are sent by the lender via email, the title company has to print them out, costs a few bucks in toner, so why not charge you $150?  I think it's way too much but almost all companies charge about that much, so it's normal.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 8
Anonymous
Not applicable

Re: Closing Costs - any of these junk?

Maybe these vary more than I thought by state, but we have an offer in at $243,000, and our closing costs are going to run about $4000. Half of that is prepaid stuff, which is not really avoidable. We aren't paying any points. Most GFEs in this area were around this same cost...between $2000-2500 in actual lender costs, and $2000 in prepaids. Did you look around? How much are you putting down? That seems kind of high.
Message 5 of 8
ShanetheMortgageMan
Super Contributor

Re: Closing Costs - any of these junk?

Not only do closing costs vary state to state, they can vary county to county (for example Alameda County, CA has many city's with transfer taxes being charged to the buyer, but here in Orange County, CA there are none that are charged to the buyer), and city to city (Chicago has higher settlement costs than Naperville, IL).  Some of the most expensive states closing costs are NY, PA, FL, VA, MD and GA due to the transfer, mortgage, recordation or intangible taxes charged on closings in those states.  CA, OR, WA, NV, AZ, SC, NJ, & DE all have closing costs on the high side as well, but not due to taxes, just because either the cost of living or the cost of doing the closing is expensive there (SC for example).  For the average size of the loan amount I thought IA's closing costs were pretty up there too.  Lower closing costs states seem to be WI, NM, KS, NE, LA, MS, AL, NC, KY, TN, and IN (although TN does have a transfer tax, the rest of the fees were very low).  And MO, MI, IN, IL, CO, UT, TX, OH, NH, and MA all seem to have what I consider average closing costs.  Any state not listed I don't have any hands on information for.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 6 of 8
PippiLongstockingWannabe
Valued Member

Re: Closing Costs - any of these junk?

Hey Shane, While I have your attention... one of the other fees is an origination fee of 1%. That's called a "point" right? And is that normal on a USDA guaranteed loan?
5/13/08: EQ: 619 TU: 659 EX: 655
7/20/09: EQ: 647
8/13/09: EQ: 697 TU: 720
7/26/10: BOUGHT MY FIRST HOUSE
10/15/10: EQ: 741
2011: lost my job due to disability
2014: foreclosure but fighting it.
2015: House saved!

2022: zero cards,
Message 7 of 8
ShanetheMortgageMan
Super Contributor

Re: Closing Costs - any of these junk?

It's called a point, correct.  If an origination fee is charged, it's typically 1%.  It can certainly be less though.  The function of paying an origination fee is to get a lower rate than if you were not to pay an origination fee.  If you'd like to compare the differences in that rate, just ask your loan officer to provide you a good faith estimate for no points as well.  The reason that paying an origination fee is beneficial is if you plan on being in the loan for a considerable amount of time, as the difference in the lower rate vs. the higher rate will be greater than the upfront cost (the origination fee) at some point.  To determine if that "break even" point is going to be soon enough for you, take the difference in the monthly payment amount and divide it into the amount of the origination fee, that number is the amount of months it'd take you to be even, and then every month after that you'd be saving the difference.
Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 8 of 8
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