How much should I expect to pay in closing costs when buying a home? Would 3% of the sale price be excessive?

Question

The woman who is doing the loan for us said we should expect to pay about 3% of the price of the house in closing costs. This amounts to $17,250!!! Is this a fair amount to pay for closing?

Answer 1

You should get a truth in lending statement that tells you what is included in the closing costs. Depenting on when closing is in relation to loan yopu may have higher cost. Also if you have any points or buy down it will hit at closing. You pay some principle and interest at closing, this is normally the largest amount on the closing document.

The mgtadvsr that gave an answer must have read your question wrong. We are not talking commission any where here. The seller pays all commissions, not the buyer

Answer 2

Keep shopping. 3% isn't an outrageous amount, but you can do better. As you shop around:
1) Try to get comparisons on the same day so that fluctuating mortgage rates aren't a factor.

2) Get a good faith estimate from each lender. Go through each of the line items to make sure you're comparing apples to apples. Ask questions - it's better to sound like an idiot for asking a dumb question than to be an idiot by paying big bucks to keep your pride. In particular, ask if the line item is something they bill for, or if it's their estimate for someone else. For example, they can estimate what the county will charge to record the new property title, but the mortgage company obviously has no control over the government. One lender might estimate $100, while another estimates $150. In the end, the county will charge what it charges, regardless of who the lender is. As you're comparing, only consider the amounts the lender charges as your comparison basis. (But don't forget that you will have to pay the extra stuff, too.)

3) Don't give any personal info (such as S.S.N.) to the lender until you're ready to fill out an application. Tell them roughly what your credit score is because their rates do depend on your score. They can reflect in their GFE that the rates quoted are based on a particular assumption. If they push you for personal info, tell them to take a hike.

4) If they have a lot of charges with several confusing names and terms, walk away. Those lenders make their money through double talking to suckers.

5) Negotiate. Tell lender A that lender B has a better deal, but you want to give him a chance to do better. Then do the same to lenders B, C, and D. Work it until you feel pretty sure you've gotten their best deal.

Answer 3

Most mortgage lenders work on 100% commission, just like Realtors. So, some portion of that closing costs estimate is most likely commission, but some is standard fees that you have to pay for every RE transaction.

Go to at least 2 other lenders and get a good faith estimate of closing costs. Compare everything, not just the interest rate, you could save yourself thousands of dollars.

If you have not settled on a house yet, you can negotiate with the seller to pay some of your closing costs. This will come off their bottom line, so you can expect to pay closer to the asking price, but it may cushion the blow of the closing costs.

Answer 4

Ask the Escrow for a HUD-1 which is a form that breaks down all the costs for you. They may call it a Settlement Statement as well. What you want to look for is anything that stands out as a red flag. HUD-1 (settlement statement) can not have misc charges anymore, and they can not have excess fees for each individual who works on the loan (originator,processor,officer,etc).

I've worked in Escrow for 4 years, with a mortgage company for 2 and in real estate for 16 years.

Answer 5

Wow that's a nice commission, I hope the sellers are paying those costs for you!! If not, I believe you maybe paying some excessive fee's unless she is "buying the rate down" with "discount points". In which case you should have a rate you can brag about to all your friends about. If that is not the case I advise you to email me. Its never to late to look at what you can get.

If you would like a professional 2nd opinion at $0.00 cost to you do the following:

Ask her (if you don't already have it) for a copy of the Good Faith Estimate and Truth in Lending forms which she should have given to you within 3 days of pulling credit.

Next contact me so I can review it with you and let you know how much she is earning, the company is charging, and who else is getting a piece of those hefty commission/fee's.

Then I can advise you on whether or not there is some money to be put back into your pocket, usually 1-2% is a good deal for closing costs. 3% I believe is pushing it.

Let me know if I can be of service.

Best Regards,

Alex M. Ramirez

Answer 6

Closing costs typically range from 2-7%. That is a fair amount.

Answer 7

the most a real estate agent can charge you is 4% no one will charge this because everyone else tries to compete with eachother, a real estate agent tries to sell your home for you, there will be paper work invilved you can hire a good attorny to do this for you for between $500 and $1500, if you can pull it of by selling it by your self, (FSBO) For Sale By Owner you will save you self about 2.5 to 3% all you will have to do to cover your self is pay the attorny fee to handle the paper work.