First Home Purchase: Help Reviewing Fees?

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LeBlanc

Recycles dryer sheets
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Nov 14, 2007
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I'm expecting to close on my first home this week and have just received my final Settlement Statement. Any chance you could skim over the charges involved and let me know if there are any red flags or things I should question? I'd greatly appreciate the input.

Contract Sales Price: $165,000
Settlement Charges to Borrower: $6,736.90
Gross Amount due from Borrower: $171,736.90
Deposit/earnest money: $3,000 (already paid)
Principal amount of loan: $145,000 (I am putting $20,000 down)
Good faith deposit fee: $350 (already paid to mortgate company)

County Taxes (10/1 - 10/24): $160.02
HOA Prorations (10/1 - 10/24): $8.43

Loan Origination Fee: $543.75
Appraisal Fee: $330.00
Credit Report: $14.00
Tax Service to Company "X": $80.00
Flood Cert to Company "X": $8.00
Mortgage Co. processing fee: $400.00
Interest from 10/22 - 11/01: $246.70
Hazard Insurance Premium: $331.92
County Property Taxes: $206.25
Settlement/Closing fee to escrow co.: $621.25
Detailed Escrow Fees (see below): $445.00
Prepare docs/email fee: $200
Loan tie-in fee: $175
Federal express: $40
Messenger fee: $30
Title insurance (lender's coverage): $400.00
Sub-escrow fee: $62.50
Lender's Endorsement: $125.00
Additional fees (see below): $656.15
Messenger fee: $30
2008-2009: 2nd Install. Taxes: $626.15
Recording fees (Deed/mortgage): $105.00
Messenger fee: $50.00
Quarterly HOA dues (Oct/Nov/Dec): $33.00
Transfer Fee to Company "X": $275.00
Document fee to Company "X": $200.00
Capitalization fee to Company "X": $400.00
Notary Signing fee: $175.00
Funds hels for: Refundable padding: $500.00

As you can imagine, this is all a bit overwhelming and a lot of the fees seem bogus...but my guess is that's just what comes with buying a house?
 
You should ask your real estate agent. There are a lot of fees there. What do they all add up to?
 
I'm working with my agent as well, just looking for unbiased inputs.

This is a long distance transaction by the way. I'm in the Middle East, the property is in North Las Vegas. My brother is in NLV as my "attorney-in-fact."

The fees add up to $6658.52...about 4.5% of the loan amount. I'm not sure why there's a $78.38 difference in the first stated "settlement charges to borrower" line and the "Total Settlement Charges" final line has $6658.52 listed.
 
4.5% seems very high - I would go slow on this transaction - especially in LV.
In Georgia, it has become the selling practice for the seller to contribute some money to the closing costs.

I'm guessing this is a resale - take a look at new houses - you can get the builder to pick up much if not all of the closing costs and add upgrades to the house.

Don't be afraid to walk away - there are many properties for you to choose from.
 
The seller is contributing $5,000 to closing costs believe it or not. The bank wants to get rid of it.

It's a 2002 model home. Purchased in December 2007 for $300,000 then bought by a bank in August for $151,000.
 
If the seller is contributing the 5K he should be questioning the fees - unless you get the 5K regardless of the amount of the fees.
 
It seems like most if not all of those fees should be fixed regardless of the size or value of the property. My fees for my first home six months ago were $1463. Since my home is only $43,000 that's about 3.4%. Your fees seem a little high but since the seller is paying most of them I wouldn't worry about it.
 
Looks like lots of junk fees or fees that are way too high, but that is comparing it to what I am used to. Real estate transactions and practices vary pretty significantly from place to place around the country.

Here's my thoughts, line-by-line:

Contract Sales Price: $165,000 -- Make sure this matches the purchase and sales agreement you signed with the seller.
Settlement Charges to Borrower: $6,736.90 -- You should be able to see how this is arrived at and why there is the ~$78 difference you mentioned. You can look at what's called a HUD-1 statement to see how this number was figured. My guess is that the $78 difference is because you and the seller have agreed to split something 50/50.
Gross Amount due from Borrower: $171,736.90 -- sum of above two, looks right to me
Deposit/earnest money: $3,000 (already paid) -- make sure this is credited to you at closing; should be reflected on the HUD-1.
Principal amount of loan: $145,000 (I am putting $20,000 down) -- Make sure this matches the lender's documents.
Good faith deposit fee: $350 (already paid to mortgate company) -- Make sure this is credit to you at closing; looks pretty typical to me.

County Taxes (10/1 - 10/24): $160.02 -- This is either a credit from you to the seller for taxes he's already paid for October, or a credit from the seller to you for taxes you're going to end up paying. Check with your county tax folks to see how things are handled in NLV. You can verify the amount by taking the annual county taxes, dividing by 365 to get a daily rate, and then multiplying by 24 for the 24 days between 10/1 and 10/24.
HOA Prorations (10/1 - 10/24): $8.43 -- Same as above. This makes sense if you have a HOA that charges about $128 per year, which is really quite low for HOA fees.

Loan Origination Fee: $543.75 -- This is charged by your lender; seems reasonable to me but should match what you were quoted. Looks like you agreed to pay 3/8ths of a point ($145,000 * .375 / 100 --> $543.75). Did you get a competitive interest rate?
Appraisal Fee: $330.00 -- This is required by the lender, is paid to the appraiser, and is a reasonable fee. It should show up on your closing statement unless you happened to pay the appraiser out of pocket.
Credit Report: $14.00 -- The lender has to pay money to pull your credit report to decide whether to lend to you or not; here they're just passing the fee along to you.
Tax Service to Company "X": $80.00 -- I'm not sure what this fee is for. I believe it is a fee to cover the lender's cost in getting set up to receive and pay your property tax bills on your behalf. It's typical for the lender to pay your property tax bills on your behalf; I'm not sure it's typical to charge for this. It's a small fee, though.
Flood Cert to Company "X": $8.00 -- This is a fee to check and see if your house is in a flood zone. If it is, you may want to consider flood insurance.
Mortgage Co. processing fee: $400.00 -- This is a general fee from your lender to cover the costs of processing your loan -- the salaries of all the people you talked to on the phone while getting the loan, plus some profit. Seems reasonable to me.
Interest from 10/22 - 11/01: $246.70 -- This is typical. This covers the interest that your mortgage accrues from the time you close to the beginning of the following month. It looks like your interest rate is around 6.25%.
Hazard Insurance Premium: $331.92 -- Seems like a good rate. Typically you pay the first year's premium up front. Check with your insurance company to make sure this amount gets credited to you as a payment.
County Property Taxes: $206.25 -- This amount seems odd to me. Typically you would put money into an escrow account for upcoming property tax payments, so I'm guessing that's what this is for.
Settlement/Closing fee to escrow co.: $621.25 -- General fee from the escrow company for handling all the details. Seems reasonable, except they've split out some more fees below. Overall the total escrow fees ($621.25 + $445) seems perhaps twice what I would expect to pay.
Detailed Escrow Fees (see below): $445.00 -- All junk fees IMHO, should be included above.
Prepare docs/email fee: $200
Loan tie-in fee: $175
Federal express: $40
Messenger fee: $30
Title insurance (lender's coverage): $400.00 -- Typical fee. In my state the amount is set by law, so you could call any title company in NLV and ask them if $400 is correct. The amount charged is based on your loan amount.
Sub-escrow fee: $62.50 -- No clue, never seen it before; sounds like junk to me.
Lender's Endorsement: $125.00 -- No clue.
Additional fees (see below): $656.15
Messenger fee: $30 -- How does this differ from the $30 messenger fee above?
2008-2009: 2nd Install. Taxes: $626.15 -- How does this differ from the county taxes above?
Recording fees (Deed/mortgage): $105.00 -- Necessary, but seems high to me.
Messenger fee: $50.00 -- How does this differ from the messenger fees above?
Quarterly HOA dues (Oct/Nov/Dec): $33.00 -- Just make sure the HOA credits your account with this payment. Fees seem on the low side.
Transfer Fee to Company "X": $275.00 -- Sounds like a junk fee.
Document fee to Company "X": $200.00 -- Sounds like a junk fee.
Capitalization fee to Company "X": $400.00 -- Sounds like a junk fee.
Notary Signing fee: $175.00 -- Sounds like a junk fee. The title company should be able and willing to notarize anything at closing for free or for a nominal fee.
Funds hels for: Refundable padding: $500.00 -- Not sure. Sounds silly to me.

Overall, my approach is to get the settlement statement and make sure I understand what every fee is for, that every fee is calculated correctly, and that every fee is in the correct column (debit or credit to you or the seller). I also, just because I'm particular, make sure all the numbers add up, although usually the escrow folks have software that does the totalling correctly once they get the numbers in the right boxes.

You should also know that in general the escrow people and the real estate agents and the lenders are doing thousands of these closings all the time and they quite regularly make mistakes and try to slip in junk fees. Just keep asking questions until you understand it and you'll do fine.

Oh, and congratulations.

2Cor521
 
SecondCor,

Thank you for taking the time. All the numbers I presented were directly from my HUD-1.

I'm very skeptical about the numerous "messenger fees" myself and will ask about them, as well as the numerous charges that appear to be "junk."

My interest rate is 6.125%
 
It seems a bit odd that the taxes & HOA fees are pro-rated through the 24th but that you start paying interest on the 22nd. OTOH that probably works in your favor.

When it's all finished, you should have a recorded loan and a recorded title. The seller should also have a recorded payoff of their mortgage so that there's not a lien (from their mortgage) against the house you now own.

At this point in the process, you're not in a position to bicker over the fees. But do these people know how to run a fax machine? I can't decide which job I'd rather have for the company-- messenger or notary! If the paperwork has any further delays then I'd argue that they owe you some frequent-messenger or frequent-notary kickbacks.
 
Notary Signing fee: $175.00

In Central Ohio, Notary Fee is about $5, I would ask about this one.

Jim
 
In the military, notary signing is free...so yeah, I will be asking.
 
It looks like alot of junk fees as others mentioned. These vary widely from one locale to another.
Is the lender a large reputable (whatever that means now days) mortgage co?
Is it a broker?

I think I would try running the HUD-1 by another lender, settlement company or maybe a CREDIT UNION?
 
Your real estate agent should have a broker. The broker is the "big boss" of the real estate company who is representing you. Often the agent is inexperienced - but the broker has a higher license.

I would sent the broker a letter saying the fees are excessive and you are considering hiring an attorney to review the fees before you close the deal. Ask him to review the fees so that he is comfortable that he is giving you the proper advise before a lawyer audits the transaction. You don't want his company to be found guilty of not properly representing you as the buyer.

I would send a copy of the e-mail to the Escrow Company.

If you are in the military, you might ask the highest ranking officer you can talk to about what assistance the military can provide. The military has public relations guys and lawyers in the LV area - and they might be willing to get involved. If all else fails talk to the chaplin - those guys can work wonders!
 
Those do seem like a lot of junk fees but as noted closing costs vary widely. In Maryland, figure 6% of the purchase price in closing costs so by that standard yours aren't so high.
 
You sound like you are in the military. If true, you could write a letter to the editor of your local newspaper explaining everything just like you did in your introduction. Then explain that because of your circumstances in the Middle East you cannot personally check all these fees - but they seem excessive and many simply bogus.

Ask in the letter to the editor if any real estate attorney would take your case on a "pro bono" basis (that means free, and lawyers are obligated to donate some free time to people just like you). I would mention the name of the Real Estate Company, the bank and the Escrow Company in your letter. Then give an e-mail address.

I suspect all of the companies involved will be blasted by everyone who reads the letter. How can they cheat a serviceman who is serving our country:confused:?

Sometimes in life you must fight your battles in the arena where you have the greatest advantage. In this case, a quiet dispute with your Escrow company will get you no where. Bring this to the attention of the press, and you hold the high ground. This is how you get rich - not by playing by the traditional rules, but by playing by the rules that work in your favor.
 
Agree with Hobo--appeal to the lender that you are in the military and see if they can waive the doc prep fee, for example (but on the other hand the banks are hurting and probably need all the nickles and dimes they can get right now).

But don't sweat them too much imho--congratulations on buying a home!!!!
 
I'm thinking that given the current crappy housing market, it might have been easier to get the seller to eat a lot of these fees. And Vegas has been one of the worst lately.
 
I can see where you're coming from Hobo, and yes, I am an active duty Air Force officer. As a few others have mentioned, I'm trying not to sweat it too much as the seller is contributing $5,000 towards those costs and I got the home at a killer deal as far as I'm concerned.

I originally posted because I've never gone through this before and all of the inputs have been very well received. Thanks again to all.
 
I was a realtor for a few years in the upper Midwest. It may vary by state, but here is my take if this were in my state.

Loan Origination Fee: $543.75 – very reasonable or even on the low end.
Appraisal Fee: $330.00 – reasonable.
Credit Report: $14.00 – reasonable.
Tax Service to Company "X": $80.00 – never heard of
Flood Cert to Company "X": $8.00 - reasonable
Mortgage Co. processing fee: $400.00 – somewhat reasonable
Interest from 10/22 - 11/01: $246.70 - reasonable
Hazard Insurance Premium: $331.92 – reasonable but should compare a few companies’ quotes
County Property Taxes: $206.25 – reasonable
Settlement/Closing fee to escrow co.: $621.25 – seems high. In my area settlement/closing fees range between $220 – 310.
Detailed Escrow Fees (see below): $445.00
Prepare docs/email fee: $200 – junk fee
Loan tie-in fee: $175 – what is this?
Federal express: $40 – seems high
Messenger fee: $30 – may be OK
Title insurance (lender's coverage): $400.00 - reasonable
Sub-escrow fee: $62.50 – what is this:confused: Never heard of it.
Lender's Endorsement: $125.00 – not familiar, could be a junk fee but could be legit
Additional fees (see below): $656.15
Messenger fee: $30 – may be OK
2008-2009: 2nd Install. Taxes: $626.15 – Why are you paying the second ½ taxes again? You’ve already paid the prorated amount from closing to the end of the year above, right? Is this one of the lender’s escrow amounts? Do you get it back when you pay off the loan?
Recording fees (Deed/mortgage): $105.00 - OK
Messenger fee: $50.00 – again??
Quarterly HOA dues (Oct/Nov/Dec): $33.00 – seems too low
Transfer Fee to Company "X": $275.00 – junk fee
Document fee to Company "X": $200.00 – junk fee
Capitalization fee to Company "X": $400.00 – junk fee
Notary Signing fee: $175.00 – junk fee
Funds hels for: Refundable padding: $500.00 – junk fee

Typically for your price range, at least in my area, closing fees are about 2.5% to 3% of total sale price, including prepaids and escrows.

Hope this helps
 
This deal is loaded with "junk fees" which are just another way to say the lender is adding whatever they think they can get away with in an attempt to take advantage of you or your seller. Maybe credit markets are so tight, they believe you have no option to use a better lender. Maybe they think you are remote, military, inexperienced or fit some other demographic that means unsophisticated and fleeceable. I would walk from this deal, but you have to make your own decision. If you want the house enough, maybe you will pay whatever they pile on.
 
LeBanc, I was a Navy Officer during Vietnam. I made enough money from buying and selling real estate to retire at age 50. Please excuse me if I am looking at your purchase through the eyes of an investor. It just makes my adrenaline flow to think of the opportunities you have at your disposal right now - but you both lack the knowledge and give big organizations way to much respect.

Here you are an Air Force Officer, with plenty of money for down payment - the absolutely perfect home buy in the eyes of the sellers. And the bank could not be in a worse position. They don't want houses, they want money! The US government is giving them tons of money just to stay alive and lend money to people like you. And buyers are very, very hard to find right now.

Yet the bank bought the house for $151k and selling it for $165k - that's a quick $14k profit. They should be begging you to take this house off their hands. Remember, the housing crisis is not finished yet. The price of houses could get even lower. I bought my first house for $15k in Southern California.

Remember, you are talking BIG money here! Why should the bank make $14k? They should be happy to give it to you at their cost. And honestly, bogus closing costs are the oldest trick in the book. You know it is not costing them that much money to do this deal.

Start demanding the ridiculous things - and use the other resouces at your command, especially the letter to the editor of the newspaper. No bank wants to look like they are cheating a serviceman - and banks are trying very hard to improve their public relations.

What defines fair? What defines a "good price"? Only the willing buyer and the willing seller can determine that. Past home prices mean nothing now. Tell the bank you want to pay $151k and no closing costs. Will they accept? Maybe! If not, maybe you can save an extra $10k in the negotiation. THAT IS A LOT OF MONEY - don't let them tell you "this is how the system works." Everything is negotiable. Remember the Golden Rule: He who has the gold, rules!

Good luck on your quest. I wish I could send you a flash disk with all of the experience and knowledge in my brain, so you could plug it into yours!
 
DW and I took advantage of the good buyers market & mortgage rates a few months ago (also had to sell our previous home), and I did a lot of homework on lenders, closing fees, etc. We ended up with Pentagon Federal who has good rates and ridiculously low fees.

About a month after closing/moving I was out playing golf with a buddy and we got paired up with a guy who was a mortgage broker. We got to talking and he said that lenders make it difficult to compare the total cost of a mortgage. They can make their profit either 'up front' or 'on the back end', which means either with higher processing/junk fees at closing or with a higher interest rate....or somewhere in the middle.

So FWIW, if you know you're getting a very competitive rate then it may be difficult to get them to remove some of those junk fees, but otherwise kick and scream to negotiate them down.

Also, the fact that the seller is kicking in $5k of the closing costs shouldn't affect how much those costs end up being. Your lender certainly doesn't care who pays for them.
 
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