house purchase closing costs!

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kongmen

Recycles dryer sheets
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Not sure if this is the right place to put this or even if anyone would like to discuss it.


Dw and I found a house we would like to purchase and after looking into the closing costs of 4% I am having second thoughts.



We have been using cash for house purchases for the last 15 years and didn't realize how the costs for borrowing money for a mortgage has increased.



If anyone has guidance on a way to reduce that 4% to something more manageable ie. Hard money? (Have never done this and don't know anything about it). Our credit rating is excellent.


Thanks for any replies.
 
It's all negotiable. Shop around, and I recommend asking a mortgage broker (or two) to see what the best deal they can put together is.
 
Are you talking mortgage costs or purchase costs? You can ask the seller to cover some of the purchase costs. Some costs can transfer to the seller, some can’t.

We paid about 2% for a construction loan which are usually more expensive so 4% sounds like a lot.
 
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COcheesehead said:
Are you talking mortgage costs or purchase costs? You can ask the seller to cover some of the purchase costs. Some costs can transfer to the seller, some can’t.

We paid about 2% for a construction loan which are usually more expensive so 4% sounds like a lot.
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Well, we looked at the "estimated" closing costs on the credit union website and it said 4%


Edit...the source for this was not our credit union it was more of a Google search said Dw.
 
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kongmen said:
Well, we looked at the "estimated" closing costs on the credit union website and it said 4%
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As I said that seems really high. They may be outsourcing the process which adds to the expense. Shop, shop, shop. It’s a competitive business.
 
You do not say what makes up that 4%....


Some options..


Title insurance... will not get rid of if you have a loan
Survey... same
legall... yea, not getting rid of this either
Taxes being split... nope, part of closing



Points... well, you can get rid of these if you have higher interest rate


So, tell us what the biggest ones are and we can comment better.
 
We decided to take up a small mortgage for our current home, after paying cash for the previous 2 homes. The additional costs were appraisal fees, I think it was $750 or so, and closing/borrowing mortgage fee of about $500. The mortgage fee was about $2000 but we were given a $1,500 credit for being "premium" customer of the bank. We split the escrow / title company fee between the sellers and buyers. We did not pay for points to buy down the interest rate, which was $1,500 for 2.5% mortgage interest because the loan officer said "You are going to pay off in 5 years anyway". I ended up at 2.75%.
 
Sorry everyone I gave erroneous info. The 4% was more from a Google search so when I get more info from our credit union I will update.
 
There are several categories of costs that you pay at closing.

There are lending costs which are associated with a mortgage. Points, origination fee, the appraisal, and possibly PMI all are lending costs.

There are closing costs which are related to the transfer of title. Title insurance and escrow fees fall here.

There are also prepaids, which are just costs associated with the house that accrue over time and you need to pay the seller back for ones they've prepaid, and maybe prepay others. These are things like property taxes, utilities, HOA fees, and so forth. These will typically be prorated to the date of closing.

For the lending fees, as others have said, shop around. Even more importantly, consider the type of loan you're getting. Conventional mortgages are cheapest in terms of closing costs on average; VA/FHA and others of that ilk are more expensive in terms of closing costs.

For the title fees, you can also maybe shop around. In my state the title fees are set by law and thus are identical across title companies (which compete on service I guess), so this wouldn't apply in Idaho.

Prepaids pretty much come with the house. If you think they're too high, buy a cheaper house.

Overall, you can ask for a HUD-1 statement prior to closing and I believe they must give one to you (although they may be permitted to estimate values on it). It's a standard format and so you can compare HUD-1s line by line. You can also google for what each line item on the HUD-1 means and what it is for.

...

I did try to figure closing costs as a percentage of house value because my son is saving up for his first home and I wanted to give him a ballpark estimate. I estimated 5% as a conservative / high side amount. On my last refinance, which is the only thing I had records for, the refinance cost was between 1% and 2% IIRC.
 
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Like so much else in real estate a lot of it is locality.

I would have been thrilled to pay only 4% closing costs on the two houses I bought near the D.C. area. The norm there was more like 6%. A lot of that was transfer taxes so there was no getting out of it.
 
You can probably save the most if you don't get a mortgage, and if you are an experienced home buyer, you probably don't need to pay a lawyer to sit next to you at settlement.

If you know your market very well and you don't need a mortgage then you won't have to get an appraisal if you don't want to.

If you know construction and understand major systems and know what to look for, then maybe you don't need an inspection.

If you go to your township building and pull the site map and if the lot boundaries are clear cut, you may want to forgo a survey.

There's not much room after that to minimize costs.

Most people are not experienced enough or know enough to eliminate the costs outlined above. I am in no way suggesting for you to go through with a sale skipping any of the items listed without knowing your specific capabilities and situation.
 
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Those credit union websites tend to exaggerate closing costs. In our state the “tax stamps”/ “transfer tax” is due on the difference between the home you sell and the home you buy. The closing cost estimations almost alway just use purchase price. In fact I even found this error on the closing docs and held up settlement for a few hours while the issue was researched and new docs provided.
 
freedomatlast said:
You can probably save the most if you don't get a mortgage, and if you are an experienced home buyer, you probably don't need to pay a lawyer to sit next to you at settlement.
.......
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That was my experience. I paid cash and my closing costs were essentially zero. The seller paid a boat load, including a high state tax on property transfer. I paid for inspections on house, well and septic.
 
travelover said:
That was my experience. I paid cash and my closing costs were essentially zero. The seller paid a boat load, including a high state tax on property transfer. I paid for inspections on house, well and septic.
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Just curious, I've owned 8 houses in 5 states over the years and never heard of a state tax on property transfer. What is that about.....??
 
jazz4cash said:
Those credit union websites tend to exaggerate closing costs. In our state the “tax stamps”/ “transfer tax” is due on the difference between the home you sell and the home you buy.
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Depends on the state. Some states charge the transfer tax and tax stamps on the full purchase price without regard for the price of the home you sold.
 
The 4% was from a google search?

Yeah better talk to real people in the real (not cyber) world.

The lender will want inspections and insurance as a loan condition, the lender will want points according to interest rate, you will split property taxes and negotiate "fixes"
 
aja8888 said:
Just curious, I've owned 8 houses in 5 states over the years and never heard of a state tax on property transfer. What is that about.....??
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Washington State - I believe it is 1.1% on first $500K
We don't have state income tax here, so real estate and inheritance taxes are high.
 
I would agree that you can try to negotiate anything. I would not agree that everything is negotiable. We listed a house in a LOCL area (say $150k to $300k) very near a HCOL - high property tax area in another state - say within 3 miles of state line. House was in good shape and we had more than 10 offers within 5 days - about one half over asking and about 3 all cash. We did not negotiate anything other than closing date. I would say that what may be negotiable is entirely governed by your local market. Where this house is, there is very low inventory so rising interest rates have had virtually no impact so far with cash buyers still out there.
 
marinauser said:
I would agree that you can try to negotiate anything. I would not agree that everything is negotiable. We listed a house in a LOCL area (say $150k to $300k) very near a HCOL - high property tax area in another state - say within 3 miles of state line. House was in good shape and we had more than 10 offers within 5 days - about one half over asking and about 3 all cash. We did not negotiate anything other than closing date. I would say that what may be negotiable is entirely governed by your local market. Where this house is, there is very low inventory so rising interest rates have had virtually no impact so far with cash buyers still out there.
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I think the saying is that everything CAN be negotiated IF both parties are willing to do so...


Back in 2008 era the buyer had a LOT of say on what they wanted... I know I did... seller had to do a lot as the house was on the market for over a year... now it is the sellers turn...



You can always bring something up and the other side says no...
 
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