General Question

goose756's avatar

Are my estimated closing-costs too high?

Asked by goose756 (655points) October 2nd, 2012

So I made an offer on a home – won’t know until tomorrow if it is accepted or not, but my loan people gave me an estimate on how much my monthly payments/closing costs would be and it seems like the closing costs are a bit high? I am a first time homebuyer so I could be completely wrong, looking for some advice. So here are the stats:

$139,900 price of home
$5,000 downpayment (FHA loan)
asked seller to pay 3% towards closing costs

loan people are telling me they estimated about $6,000 for closing costs, so after the 3% from the seller my amount due at closing would be about $7,300 (including my down payment).

I talked to my dad because I have no idea what I’m doing and he said that theirs was around $3,000 (for a more expensive home) and that it seems high. Any help please?

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30 Answers

chyna's avatar

This seems very high. I’ve bought 3 homes in my lifetime and refinanced a few times (am in the process of refinancing right now) and I’ve never paid more than 2,500 in closing costs.

bkcunningham's avatar

You should have gotten a HUD-1 Settlement Statement that breaks down the closing costs to the penny.

goose756's avatar

I’m not entirely sure of everything that is included in closing costs (and I will get a break down if my offer is accepted) – but what might cause them to be so high? Does any of my info (loan type, down payment amount, etc) make it increase? or does my realtor have anything to do with it? I’m not sure of all the details..

bkcunningham's avatar

Here is a very good breakdown, @goose756.

goose756's avatar

I guess I will know more when I get the breakdown, but until then – do you think it is possible that I am getting taken advantage of in a certain area?

bkcunningham's avatar

What do you mean, taken advantage of “in a certain area?”

goose756's avatar

I mean are these amounts fixed, or is there a chance that someone or some fee is being charged at way higher than it should be?

gailcalled's avatar

@goose756: Should you not have a lawyer present at the closing to protect you? We did whenever we purchased a home (once in 1974, once in 1984 and once in 1986).

bkcunningham's avatar

After I reread your question, I wonder if you would clarify some things for me, @goose756?

Okay, you are paying $139,900 for the house.

You put down $5000.

If the seller agrees to pay 3 percent of the closing costs, what amount would they be giving you toward closing?

Also, are you saying the $5000 down payment is included in the estimated $7300 due at closing? That would leave the closing cost incurred by you at $2300.

goose756's avatar

yes that is all correct – the 3% closing cost paid by seller is 3% of purchase price which is about $4200 so that plus the $2300 makes the total closing costs about $6500

bkcunningham's avatar

It sounds like a lot, but I have no idea what is included in your particular closing costs. I don’t think they are trying to take advantage of you. If you think that, you shouldn’t be getting tied up with them for the next 20 or 30 years. lol Tell the person you are working with it seems high and ask them to give you a rundown of what is included.

Congratulations on the pending home purchase. I think that your worries show a certain level of maturity that give me faith in you and your decision to be a home buyer.

bkcunningham's avatar

Don’t be intimidated or embarrassed to ask questions. This is a fantastic learning experience. I know with all certainty that your questions have been asked before and by more than one person. Keep us informed if your offer is accepted. Fingers crossed.

goose756's avatar

Thanks for your help I will let you know how it goes

DrBill's avatar

One expense that catch a lot of first time buyers off guard is you have to fund the escrow account for the first year up front. If you already own a house and are buying a new one, or doing a re-fi, the escrow for the new house is funded through the escrow account already active for the old house.

Tropical_Willie's avatar

I think @DrBill hit the nail on the head ^ ^ .
There maybe insurance and taxes set aside in an escrow account. The HUD sheet will spell it out.

SuperMouse's avatar

Most of the costs associated with closing the loan such as appraisal, doc prep, processing, credit report, etc. are going to be fixed. The part that is negotiable is the number of points you pay. As @bkcunningham mentions you should have an estimate of your closing costs that provides detailed information on the fees.

FYI, the escrow account @DrBill is referring to you covers the cost of property taxes and hazard insurance. It is also sometimes called an impound account and it is required on most loans similar to yours.

Skaggfacemutt's avatar

My son is just at this moment closing a deal on a house. He got the house for $105,000, with the seller paying $3,000 in closing costs. My agent said that 3% in closing costs is normal, but he is getting an FHA loan that lets you finance the down payment in a second loan, so he has to pay closing on both loans. He will wind up having to cough up $1,000 to cover the rest of the closing costs. The down is about $5,000 (5%), but again, he is financing that.

So, $7,300 for the rest of your closing costs AND the down sounds about right. Your down at 5% would be $7,000.

bkcunningham's avatar

Your son is financing the down payment?

Skaggfacemutt's avatar

Yes, it is a new FHA loan of some sort. My daughter bought a house 6 months ago with the same kind of loan.

goose756's avatar

well I suppose it doesn’t matter anymore since a cash buyer came in with 2 hours til the deadline. I’m seriously discouraged – it is impossible to find houses in the Phoenix area that are even FHA approved and then crappy people like this come along who are most likely just investors and aren’t even going to live there. Seriously disappointed.

Skaggfacemutt's avatar

@goose756 Don’t give up. My son has been working on this house deal since March.

chyna's avatar

@goose756 I’m sorry you missed out on this house, but another one will come along that you will like just as much or more than this one.

bkcunningham's avatar

I’m so sorry, but don’t be discouraged, @goose756. If it is meant to be, it will happen. You never know, something may turn up terribly wrong in the home inspection and you’ll be grateful you didn’t have more time invested in this one. Keep looking and the right one will come along. You are gaining a valuable education in the entire process. Keep saving your money and keep looking.

Do you have a realtor helping you look for a home?

goose756's avatar

Thanks everyone – yes @bkcunningham I’m working with a realtor. It has been hard because there are so little houses to choose from, even less that are FHA approved, and cash buyers are taking everything within 1 or 2 days :( particularly within my price range. Hopefully something else will turn up soon.

Pandora's avatar

I would think a lot of it depends on where you live.

Skaggfacemutt's avatar

We have a smorgasbord of houses for sale in Salt Lake City, but they are almost all short sales, and take up to a year to get the deal done. There were about 10 for sale in the complex that my son is buying in. Within an hour of being put on the market, someone would put in an offer. My son put in an offer on 6 of them, but he wasn’t in first place on any. In fact, the one he is getting, he was fourth place on. But since they take so long, the other 3 buyers moved on before the bank was ready to accept an offer.

A short sale might be the way to go for you. I wouldn’t do a HUD home, because it causes a bidding frenzy and the bidding drives the price up. There was a HUD home that my other son was interested in. It had been on the market for $97,500 for months with no takers. Then HUD got it, and it wound up selling for $160,000. Really? People just want to win that bid.

goose756's avatar

You guys are not going to believe this. They ended up accepting my offer over the cash offer! They wanted an owner occupant only :D plus they are giving a home warranty.

Talked to financial people and I am getting a lender credit which knocks my closing costs down by like 1500, so unless something goes terribly wrong along the way it looks like all is good in the world!!


Skaggfacemutt's avatar

Yay!!!! I am so happy for you!

Seriously, check out that FHA first-time buyer loan that takes care of your down payment. Did you ask the seller to pay your closing costs in your offer? I hope so.

bkcunningham's avatar

WONDERFUL!! : ) Congratulations, @goose756. Fingers crossed here that your home inspection goes smoothly. If at all possible, be there for the home inspection. You can talk to the inspector and learn a great deal about the home. Ask lots of questions.

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