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Old 03-01-2007, 04:12 PM
 
Location: in my mind
2,745 posts, read 13,536,195 times
Reputation: 1620

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Sorry y'all. Math is not my thing.

I am trying to keep my loan amount around $60,000 and I have $10,000 to 15,000 to put down. I'm pre-approved for $75,000 but I don't want to borrow that much, as I'm not college degreed yet, and only make enough to comfortably afford a total mortgage (escrow too) of about $600-700 a month, with the closer to $600 being better of course. It is a sub-prime loan so the rate is higher, decreasing my spending power as well, but for personal reasons I cannot wait to fix my credit more, and I cannot rent for less than $850 a month for my family size, so I'm going for it and will refinance later.

My closing costs are going to be around $5000-6000

I am looking at homes priced under $80,000 and don't want to spend more than $72,000.

My agent said if I offer $75,000 on a property and ask that the seller pay closing (most or all, depends), then that's basically the same as if I'd offered $70,000 and paid my own closing.


Before you all fall over from shock, yes, I'm in an area where this amount will get you a starter home. Not a pretty one, but decent and safe and better than renting.

The extra money (i would have spent on closing) would go for a higher down payment instead, making it all the same in the end as far as payments.

Is this right?

Last edited by fierce_flawless; 03-01-2007 at 04:22 PM..
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Old 03-01-2007, 05:30 PM
 
11,375 posts, read 47,154,917 times
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I think I'm falling over in shock over the "$5,000 - 6,000" in closing costs for a $75,000 home on which you're putting a $15,000 down payment for a very strong equity position.

Can you break out the anticipated closing costs?

Somehow, this doesn't square with the equivalent of $2,000 price adjustment you say your realtor is projecting if you have the seller pay the closing.

Even with a potential couple of points loan origination fee on your $60K loan, and a few hundred dollars for the "closing" at the title company, and a reasonable title insurance policy (which should be pretty nominal on a $75K property), property tax escrows/deposits, survey, appraisal ($300?), termite inspection, etc. ... $5-6K closing costs seems way out of line for a $72K property.

And, your PITI payment shouldn't have PMI insurance, since you'll have equity of 20% in the property to start with.

More details would really help the folks on his forum give you the best advice possible.
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Old 03-01-2007, 05:47 PM
 
Location: Sometimes Maryland, sometimes NoVA. Depends on the day of the week
1,501 posts, read 11,146,520 times
Reputation: 1132
To the seller, offering $75k and asking for $5k back is the essentially same as offering $70k with no cash back (subsity).

Here is the hypothetical math: Hypothetically, the seller bought the house for $50k and out $10k down. They have a hypothetical $40k mortgage. (note, the math won't work out this nicely b/c there are other fees and such).

Option A: You offer $75k and ask for a $5k subsity. Seller is given $75k at closing, from that, they pay off the mortgage ($40), pay the commission (6% = $4500), and give you $5k, this leaves them $25,500.

Option B: You offer $70k, so subsity. Seller is given $70k, pays off $40k, pays commission (6% = $4200), leaving $25,800.

So to the seller, the amount of cash they get from the sale doesn't change substatially.

For you as a buyer, it isn't quite that simple.
Option A: $75k w/ $5k subsity. You put your total $15k down, your mortgage is $60k. Your $15k is 20%, so you don't pay PMI.

Option B: $70k w/o subsity. Estimate 3% closing costs (the estimate in my state), so you will have about $2100 in closing costs, leaving you with $12900 to put as a down payment. This is only 18% of $70k, so you have to pay PMI.

Note - I think my math is right, this is my understanding. I'm sure someone will correct me if I am wrong. I've also been told that some lenders won't allow for more than a 3% seller subsity, and $5k is more than 3% of $70k.
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Old 03-01-2007, 05:59 PM
 
Location: in my mind
2,745 posts, read 13,536,195 times
Reputation: 1620
Quote:
Originally Posted by sunsprit View Post
I think I'm falling over in shock over the "$5,000 - 6,000" in closing costs for a $75,000 home on which you're putting a $15,000 down payment for a very strong equity position.

Can you break out the anticipated closing costs?

Somehow, this doesn't square with the equivalent of $2,000 price adjustment you say your realtor is projecting if you have the seller pay the closing.

Even with a potential couple of points loan origination fee on your $60K loan, and a few hundred dollars for the "closing" at the title company, and a reasonable title insurance policy (which should be pretty nominal on a $75K property), property tax escrows/deposits, survey, appraisal ($300?), termite inspection, etc. ... $5-6K closing costs seems way out of line for a $72K property.

And, your PITI payment shouldn't have PMI insurance, since you'll have equity of 20% in the property to start with.

More details would really help the folks on his forum give you the best advice possible.

Hi!

I actually have the info from my GFE from the first lender I talked to, and this was based on 10,000 down and a max purchase price of $75,000. He was telling me about $3700 for closing. I then talked to a second broker who said that lender #1 had seriously lowballed the closing costs and that I should expect to pay a couple grand more.... So I have been figuring a "worst case scenario" of around $6,000.

Here it is straight from my GFE:


LOAN AMOUNT: 65000 INTEREST RATE: 8.500% TERM: 360 months

800 ITEMS PAYABLE IN CONNECTION WITH LOAN

801 Loan Origination Fee 1% 650.00
802 Loan Discount (blank)
803 Appraisal Fee 350.00
804 Credit Report (blank)
805 Lender's Inspection Fee (blank)
808 Mortgage Broker Fee (blank)
809 Tax Related Service Fee 49.00
810 Processing Fee 400.00
811 Underwriting Fee 995.00
812 Wire Transfer Fee (blank)
ADMIN 375.00

1100 TITLE CHARGES

1101 Closing or Escrow Fee 200.00
1105 Document Preparation Fee 200.00
1106 Notary Fees (blank)
1107 Attorney Fees 200.00
1108 Title Insurance 175.00


1200 Government Recording and Transfer Charges

1201 Recording Fees 105.00
1202 City/Cty Tax Stamps (blank)
1203 State Tax Stamps (blank)

1300 Additional Settelment Charges

1302 Pest Inspection (blank)


Estimated Closing Costs $3699

900 Items Required by Lender to be Paid in Advance

901 Interest for _____ days at $ (blank) 15.3472 per day (blank, no dollar amount)
902 Mortgage Insurance Premium (blank)
903 Hazard Insurance Premium $360.00
904 (blank)
905 VA Funding Fee (blank)

1000 Reserves Deposited With Lender

1001 Hazard Insurance Premium 1 month @ $30.00 per month --$30.00
1002 Mortgage Insurance Premium Reserves (blank)
1003 School Tax (blank)
1004 Taxes and Assessment Reserves 1 month @ $125.00 per month -- $125.00
1005 Flood Insurance Reserves (blank)

Estimated Prepaid Items/Reserves: $515.00
Total Estimate Settlement Charges: $4214.00

Compensation to Broker (not paid out of loan proceeds) -- BLANK

Total Estimated Funds needed to Close:

Purchase Price Payoff: $75,000
Loan Amount (-) $65,000
Est. Closing Costs (+) $3699
Est. Prepaid Items/Reserves (+): $515
Amount Paid By Seller (-) $0.00

Total Estimated Funds Needed to Close: $14,214


Total Estimated Monthly Payment:

Principal & Interest: $499.79
Other Financing (P&I) Blank
Hazard Insurance $30
Real Estate Taxes $125
Mortgage Insurance (blank)
Homeowner Assn. Dues (blank)
Other (blank)

Total Monthly Payment: $654.79
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Old 03-01-2007, 07:01 PM
 
Location: Sometimes Maryland, sometimes NoVA. Depends on the day of the week
1,501 posts, read 11,146,520 times
Reputation: 1132
Quote:
Originally Posted by fierce_flawless View Post
Hi!

800 ITEMS PAYABLE IN CONNECTION WITH LOAN

801 Loan Origination Fee 1% 650.00
802 Loan Discount (blank)
803 Appraisal Fee 350.00
804 Credit Report (blank)
805 Lender's Inspection Fee (blank)
808 Mortgage Broker Fee (blank)
809 Tax Related Service Fee 49.00
810 Processing Fee 400.00
811 Underwriting Fee 995.00

812 Wire Transfer Fee (blank)
ADMIN 375.00
I know you mentioned it being subprime, so maybe thats part of it, but the lender is charging you a *lot* for this loan. The fees I bolded are often considered "junk fees." Processing and admin are just extra profit. Underwriting should be a typical cost of doing buisness covered under loan originiation. Those extra $1770 in fees pretty much covers the difference between my $2100 estimate and your $3700 quote. Might want to try to negotiate a couple of those off.
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Old 03-01-2007, 09:14 PM
 
11,375 posts, read 47,154,917 times
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In addition to the "junk fees" spotted by rubytue, I'd be questioning others that appear excessive, redundant, or questionable:

DOC PREPARATION FEE $200
ATTORNEY FEE $200

If they need an attorney in-house to review their own work, that's an internal cost of them doing business which is paid for out of their title insurance fee.

In the states I've owned property, the title insurance policy is paid for by the SELLER since they're the one insuring the lien-free clean title trail to you, the BUYER.

So, I'd question the $175 Title Insurance fee ... what, you've got to buy insurance to protect yourself that the seller had a clean title to transfer to you?

Also, check with your insurance agent about the Hazard Insurance. You will be able to get a much better deal yourself than the title or mortgage company will obtain for you ... especially if you have other items to insure in a package (such as household effects, personal property, boats, etc.). What you'll do is buy your own policy and have your insurance agent send a "proof of insurance" standard form to the closing instead of having it paid as a line item there. Of course, you'll need to do this in advance and notify the lender/title company so they can draw up the correct doc's before the closing.

Otherwise, the fees/charges appear to be pretty much in line with what I'd expect, much closer to a couple grand than all the junk they're trying to get out of you. Don't think because you're a sub-prime borrower that they're entitled to these junk fees ... they've already addressed that risk with a higher interest rate loan. In the mortgage biz, even a 1/4% rate-up is a big deal. You're paying (compared to my area's marketplace) well over a percent higher, if not more ...

Check the proposed mortgage (with the lender) to be sure there's no pre-payment penalty so that you can ditch this loan for a better one as your equity and financial track record improves in the next 24 months.

Good luck on your purchase!
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Old 03-01-2007, 09:28 PM
 
Location: Sometimes Maryland, sometimes NoVA. Depends on the day of the week
1,501 posts, read 11,146,520 times
Reputation: 1132
Quote:
Originally Posted by sunsprit View Post
In the states I've owned property, the title insurance policy is paid for by the SELLER since they're the one insuring the lien-free clean title trail to you, the BUYER.

So, I'd question the $175 Title Insurance fee ... what, you've got to buy insurance to protect yourself that the seller had a clean title to transfer to you?
Interesting. I need to check on my new state. In my old state (Virginia), title insurance was the buyer's thing. It saved my stress on my recent sale when a very old lien (from before I bought it) showed up as unreleased.
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Old 03-01-2007, 11:07 PM
 
Location: Just south of Denver since 1989
11,485 posts, read 31,083,240 times
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Default Every state has its own localisms

In Colorado the Seller pays for the owner's policy, and the buyer pays for the lender's policy.

And even that would be negotiable.
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Old 03-02-2007, 01:39 PM
 
19,284 posts, read 25,827,432 times
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i have a simple question, the "processing fee" is that from the lender? the title company? or.....the listing broker????
i've seen some slippery brokers, throw in some processing fees, and if uncontested, they always get them.
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Old 03-02-2007, 01:40 PM
 
Location: in my mind
2,745 posts, read 13,536,195 times
Reputation: 1620
Okay y'all...

The broker says that a lot of this is "worst case scenario" and he thinks it will likely be less.

The other broker I talked to said the opposite.. that this was a low estimate and it would be much more and she was quoting me somewhere near 8% in closing costs!

I hate dealing with salespeople. No offense to salespeople, but I'm always so afraid of being taken advantage of.

The first broker is sooooo nice and informative and so forth.

Oh, and I ran all this by a third who seemed to think that the closing costs would likely "fall somewhere between the middle" of what 2 numbers I'd been given. So is this just the cost of poor credit or is everyone feeding me a line?
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