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Old 01-08-2018, 08:17 PM
 
Location: Downtown Los Angeles, CA
1,818 posts, read 1,014,772 times
Reputation: 2049

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Hi All,

I'm looking to purchase a SFR in Los Angeles, but unlike much of my competition, I'm not sitting on a pile of cash. My credit and DTI are in a good enough place to secure a 95% LTV mortgage with just 5% down. So that's great. But when I look at what's all needed to make this happen, closing costs (~2.5%) will likely be another $17k. This leads to a few questions.

Are buyers expected to pay closing costs in Los Angeles?
Am I able to overpay on the home and get a credit back for the closing costs?
Do I have other options to avoid closing costs?

Thanks in advance!
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Old 01-08-2018, 10:56 PM
 
25 posts, read 4,331 times
Reputation: 36
Not real familiar with LA, but I warned my parents about that, when they sold last Spring. Sure enough, two offers on the first day, one 10,000 over ask, but wanted cc. The realtor said it was risky, they took the other offer, and closed perfectly on time, without anything near a glitch. Other agent was furious...too bad. Low down loans actually hurt young buyers, as it just pushes prices up that much more.
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Old 01-08-2018, 11:01 PM
 
Location: Tennessee at last!
1,654 posts, read 1,376,064 times
Reputation: 3153
You can ask for closing costs, but your offer will likely be so much less competitive that it will not be accepted. That is a competitive market and many houses are bought with cash and over appraisal values.

I listed two homes from my mother's estate in the suburbs of LA and one was under contract the same day, the other 3 days later. Neither even made it to the open house as they were both under contract in less than a week. Both at full price offers, which were at what I considered the high end of what they would appraise at...and it was the correct price once the appraisals came through right on the list price.

Could have waited until after the open house and got higher cash prices without appraisals, but liked that the buyers--disabled vet with a vet loan, etc.
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Old 01-09-2018, 10:15 AM
 
Location: Downtown Los Angeles, CA
1,818 posts, read 1,014,772 times
Reputation: 2049
Quote:
Originally Posted by vientianevinny View Post
Not real familiar with LA, but I warned my parents about that, when they sold last Spring. Sure enough, two offers on the first day, one 10,000 over ask, but wanted cc. The realtor said it was risky, they took the other offer, and closed perfectly on time, without anything near a glitch. Other agent was furious...too bad. Low down loans actually hurt young buyers, as it just pushes prices up that much more.
Thank you for the info. Unfortunately, us younger buyers don't tend to have 10%-20% downpayments. I'm hoping a full credit approval will take some attention away from our low DP.

Quote:
Originally Posted by lae60 View Post
You can ask for closing costs, but your offer will likely be so much less competitive that it will not be accepted. That is a competitive market and many houses are bought with cash and over appraisal values.

I listed two homes from my mother's estate in the suburbs of LA and one was under contract the same day, the other 3 days later. Neither even made it to the open house as they were both under contract in less than a week. Both at full price offers, which were at what I considered the high end of what they would appraise at...and it was the correct price once the appraisals came through right on the list price.

Could have waited until after the open house and got higher cash prices without appraisals, but liked that the buyers--disabled vet with a vet loan, etc.
Thanks for the info. We've definitely got our work cut out for us. I plan on submitting a letter with each offer, and getting a full-credit approval to soothe the agent/seller's mind.
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Old 01-09-2018, 10:36 AM
 
4,135 posts, read 10,943,581 times
Reputation: 2348
Quote:
Originally Posted by adr3naline View Post
Thank you for the info. Unfortunately, us younger buyers don't tend to have 10%-20% downpayments. I'm hoping a full credit approval will take some attention away from our low DP.



Thanks for the info. We've definitely got our work cut out for us. I plan on submitting a letter with each offer, and getting a full-credit approval to soothe the agent/seller's mind.
Another option is to have your lender "premium price" your loan. If you accept a higher interest rate (say 0.25% higher), your lender can provide a Lender Credit that can reduce or completely wipe out all the closing costs.
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Old 01-09-2018, 10:46 AM
 
788 posts, read 569,057 times
Reputation: 1550
Quote:
Originally Posted by adr3naline View Post
Hi All,

I'm looking to purchase a SFR in Los Angeles, but unlike much of my competition, I'm not sitting on a pile of cash. My credit and DTI are in a good enough place to secure a 95% LTV mortgage with just 5% down. So that's great. But when I look at what's all needed to make this happen, closing costs (~2.5%) will likely be another $17k. This leads to a few questions.

Are buyers expected to pay closing costs in Los Angeles?
Am I able to overpay on the home and get a credit back for the closing costs?
Do I have other options to avoid closing costs?

Thanks in advance!
You are clearly not ready to purchase a home and shame on anyone helping you get one. If you donít have a good job, no debt, down payment, closing costs, AND six months living expenses saved up, please wait until you do.
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Old 01-09-2018, 12:23 PM
 
Location: Downtown Los Angeles, CA
1,818 posts, read 1,014,772 times
Reputation: 2049
Quote:
Originally Posted by Sharpydove View Post
You are clearly not ready to purchase a home and shame on anyone helping you get one. If you don’t have a good job, no debt, down payment, closing costs, AND six months living expenses saved up, please wait until you do.
Please don't derail my thread, and instead read up on buyer tendencies in the 2000's. I will flag anything further.
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Old Yesterday, 06:12 PM
 
Location: New York
2,236 posts, read 3,935,041 times
Reputation: 1580
Quote:
Originally Posted by adr3naline View Post
Hi All,

I'm looking to purchase a SFR in Los Angeles, but unlike much of my competition, I'm not sitting on a pile of cash. My credit and DTI are in a good enough place to secure a 95% LTV mortgage with just 5% down. So that's great. But when I look at what's all needed to make this happen, closing costs (~2.5%) will likely be another $17k. This leads to a few questions.

Are buyers expected to pay closing costs in Los Angeles?
Am I able to overpay on the home and get a credit back for the closing costs?
Do I have other options to avoid closing costs?

Thanks in advance!
Understand you are not rich, being that you are purchasing. Look at an FHA loan, low fixed rate, allows sellers concessions, lower down payment. Has month mortgage insurance (MMI) similar to conventional loans with (PMI) principle mortgage insurance. These type of loans are easier to obtain for first time buyer.

Answering your question what are expected closing costs?

There are five basic categories of charges and fees in settlement or closing transactions:
  • Your down payment is part of your closing costs. The more your put down = equals lower fees.
  • Costs of getting a mortgage. These include survey, appraisals, credit checks, loan documentation fees, notary charges, loan origination, commitment and processing fees, hazard insurance, interest prepayments, and lender's inspection fees.
  • Charges for establishing and transferring ownership. These include title search, title insurance, related legal fees, and fees for conducting the settlement.
  • Amounts paid to state and local governments. These include city, county, and state transfer taxes, recording fees, and taxes.
  • Amount of escrow setup for your home owners insurance and mortgage taxes
  • Amount of up front PMI or MMI.
Am I able to overpay on the home and get a credit back for the closing costs?

Closing costs are the fees to close your loan. If you overpaid on the home, you would not need a mortgage. Recommend you read what are settlement costs - link Consumer Financial Protection Bureau

Last question - Do I have other options to avoid closing costs?

As a possible option roll closing costs into loan to expect a higher rate/payment. This method is often used for borrowers that will be selling property in the near future. If your goal is to keep property for the low term, it is recommended to pay your costs and not rolling them into loan.

It is a very common mistake people find a home first, then they seek a loan....

My advice before you find a home, get qualified for a loan first. That way you know how much you can be approved for.

Good Luck..
.
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Old Today, 10:59 AM
 
Location: Downtown Los Angeles, CA
1,818 posts, read 1,014,772 times
Reputation: 2049
Quote:
Originally Posted by Modification Specialist View Post
Understand you are not rich, being that you are purchasing. Look at an FHA loan, low fixed rate, allows sellers concessions, lower down payment. Has month mortgage insurance (MMI) similar to conventional loans with (PMI) principle mortgage insurance. These type of loans are easier to obtain for first time buyer.

Answering your question what are expected closing costs?

There are five basic categories of charges and fees in settlement or closing transactions:
  • Your down payment is part of your closing costs. The more your put down = equals lower fees.
  • Costs of getting a mortgage. These include survey, appraisals, credit checks, loan documentation fees, notary charges, loan origination, commitment and processing fees, hazard insurance, interest prepayments, and lender's inspection fees.
  • Charges for establishing and transferring ownership. These include title search, title insurance, related legal fees, and fees for conducting the settlement.
  • Amounts paid to state and local governments. These include city, county, and state transfer taxes, recording fees, and taxes.
  • Amount of escrow setup for your home owners insurance and mortgage taxes
  • Amount of up front PMI or MMI.
Am I able to overpay on the home and get a credit back for the closing costs?

Closing costs are the fees to close your loan. If you overpaid on the home, you would not need a mortgage. Recommend you read what are settlement costs - link Consumer Financial Protection Bureau

Last question - Do I have other options to avoid closing costs?

As a possible option roll closing costs into loan to expect a higher rate/payment. This method is often used for borrowers that will be selling property in the near future. If your goal is to keep property for the low term, it is recommended to pay your costs and not rolling them into loan.

It is a very common mistake people find a home first, then they seek a loan....

My advice before you find a home, get qualified for a loan first. That way you know how much you can be approved for.

Good Luck..
.
Thanks for the info!

We plan on getting a full credit approval prior to making offers, so we won't be going in blind.

This will be a 5+ year home for us, so rolling closing costs into the mortgage doesn't sound appealing. I've also read this is difficult with many lenders.

I had an FHA loan for my first home. The length of the approval made it difficult to buy in the Milwaukee market, so I can't help but think it would make our offer incredibly unappealing in LA.

Also: I've unintentionally disregarded a potential pile of cash. I have more than enough cash value in my life insurance to cover closing costs. Now I just need to figure out if this "loan against myself" would reduce my worthiness during financing.
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