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Contributor

## Is this right? I am trying to understand closing cost and down payment.

Just trying to understand the cash to close Ilustration my husbad and I received from the loan officer thru the builder.  Can someone with some experience shed some light.

Sales Price- 470k

Base Loan amt- 454k

Total Loan amt- 461k

Interest rate- 3.5%

FHA

Est closing costs- \$15,842.18

Est prepaid items/ Reserves-\$4,545.93

Cash from borrower- \$28,901.11(total includes the required down payment and does not reflect any gift funds)

then there is several other pages with other settlement charges- \$19,538.11???

Starting Score: Trans 708 Eq 700
Current Score: Trans 731b>Eq 702Goal Score: 750

Take the FICO Fitness20123226003331USD
Message 1 of 8
7 REPLIES
Valued Contributor

## Re: Is this right? I am trying to understand closing cost and down payment.

I came up with a figure just slightly less, but in the same ballpark...

Sales Price: \$470,000

3.5% down payment: \$16,450

Closing Costs: \$15,842

Money already paid: \$4,545

So, \$16,450 + \$15,842 = \$32,292 - \$4,545 = \$27,747.

Why is it \$1,154 less than what they show? That I don't know.

Message 2 of 8
Valued Contributor

## Re: Is this right? I am trying to understand closing cost and down payment.

Mikes math looks good.

Message 3 of 8
Established Member

## Re: Is this right? I am trying to understand closing cost and down payment.

Just curious regarding this scenario. Are closing costs ( in part ) based on price of home or is it more based on the the chosen lender (or state)?

Message 4 of 8
Valued Contributor

## Re: Is this right? I am trying to understand closing cost and down payment.

Both actually..

But with a house at that price, closing costs will be higher because of insurance and tax costs that need to be paid at closing..

Message 5 of 8
Contributor

## Re: Is this right? I am trying to understand closing cost and down payment.

Thanks everyone.....I really appreciate the quick responses.....

Starting Score: Trans 708 Eq 700
Current Score: Trans 731b>Eq 702Goal Score: 750

Take the FICO Fitness20123226003331USD
Message 6 of 8
Moderator

## Re: Is this right? I am trying to understand closing cost and down payment.

masseye wrote:

Just trying to understand the cash to close Ilustration my husband and I received from the loan officer thru the builder.  Can someone with some experience shed some light.

Sales Price- 470k

Base Loan amt- 454k

Total Loan amt- 461k

Interest rate- 3.5%

FHA

Est closing costs- \$15,842.18

Est prepaid items/ Reserves-\$4,545.93

Cash from borrower- \$28,901.11(total includes the required down payment and does not reflect any gift funds)

then there is several other pages with other settlement charges- \$19,538.11???

Let me point out the the phrase above "estimated prepaid items and reserves" for \$4545 refers to the estimate for your escrow account and items that are paid in advance at closing. For example, you have to pay the first full year at or prior to closing for homeowners insurance and your lender will charge approx an extra 2 months of the insurance premium to put into your escrow so that next year the annual insurance premium can be paid about 60 days before it is due.  This is considered a pre-payment.

In addition to homeowners insurance, you will pay for the per diem interest from the date of closing to the end of the month. As an example, if you close on the 15th of April then the interest from April 15th thru April 30th is collected at closing (hence the term "pre-paids"). To continue the example, the first full mortgage payment would then be due June first. This is the only time you pay interest before it is due is at the closing table. Otherwise your interest is paid in arrears. In this example the June mortgage payment consists of all the interest due for April plus a principal reduction in accordance with your loan docs. You can see the amounts on your specific amortization schedule.

Message 7 of 8
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Moderator

## Re: Is this right? I am trying to understand closing cost and down payment.

Correction to the above example: the prepaid interest is Aprils per diem interest. June's payment consists of May's interest plus a principal reduction due June 1.

Message 8 of 8