First Time Home Buyer Question About Closing Costs
I know this may be a little off topic, but this is my first house I am buying and will be living in it. I plan on renting it down the road or turning it for a profit though.
My question is there are about 10k in closing costs: everything from 1 point to title fees. What can I do not to get screwed???????????????????????
I am buying from Ryland, going through Ryland Mortgage ( who will sell it to Countrywide most likely, who by the way does not charge points) and using Ryland title.
I have to use Ryland everything to get the 25k in "free stuff", otherwise I pay 25k extra......
Any help would be great 
Thank you!
How much is the house? Usually closing costs from direct lenders run around 3%. Sometimes if you are getting creative financing i.e. no doc, or if your credit is less than stellar, points are added to the closing costs. Mortgage brokers generally cost more. 10% seems a bit obscene to me. What do you get in that $25,000 giveaway?
The house is 219k. I got to pick whatever options I wanted for the "25k":Catherdral ceilings, fireplace, recessed lighting, superbath etc etc...
They want 350 roughly for title search to give you one example.
Well I am no expert but I have went through the mortgage process several times with homes more expensive than the one you're talking about and my fees were always way less Of course, what they say is "free" might not really be free, if you follow What you have to consider is if you feel like you are getting a good deal on the home. If so then the $10K is something you'll just have to live with
Its a new home is a new neighborhood. I suppose it is a good deal...It is what new homes cost right now. So I have to take what I can get. It will most likely go up fairly well. BUT, I still don't want to get ripped off. Just want to find out where my rights are and what ground I have to stand on..
All my life I have waited with great patience for an Escrow Officer to offer me a kiss at time of closing. So far it has not happened. After what most of them have just finished doing to me I think I am entitled.
I review all of my costs continualy even to Notary Fees, especialy recording fees, how many pages for the Mortgage and or Trust Deed. What notices have to be recorded and paid for. Title Costs I check as most large builders are working on an open order with a very large discount and I wish to participate in those saving. I query process fees and I insist on a full copy of the appraisal and any discounts that went to persons around the appraiser. If the point or place of closing belongs to the Seller, why I want part of that savings.
You just keep on asking, and remember an estimate of closing costs is a document created to be modified by future expenses and costs.
Put up a fight, Why should you pay an Escrow or Closing fee and still have to pay for Document Preps etc. etc.
Attack, Attack Lucius
I'm sure different areas of the country vary, but I am a builder and on all new homes I build, if the offer is reasonable, I pay up to 3% of all closing costs. This does not include any fees for their mortgage, but does include appraisal, etc. It's never been above 3% of the house, and usually is a lot less like 1.5% thanks to having a good closing attorney.
Sounds like you were sold on the house and then found out some conditions without realizing what they cost. Seems like in that price range a fireplace would be standard, not an extra, etc.
Also sounds like you really like the place. Sometimes that's worth more than what you have to pay. Gotta choose between your heart and your head (good investment?). I would insist on a full disclosure of closing cost, mortgage cost, etc., well in advance of closing. And I'd check out a few other new home areas and their builders, just to be sure I'm getting my money's worth. Wouldn't hurt to look at some previous sales of the builder (if there are some in the area), like a year ago, and see what their value is now. Look through Multiple Listing for the last year for sales in the area. See if you can find some comps for the builders homes that were fully finished before sold, and see what they sold for. Might give you some leverage.
Happy House Hunting,
Terry
Builders usually won't pay title insurance on new construction. It's generally billed to the buyer, at least around my neck of the woods. That's probably why you are being charged. Did you have a realtor or did you deal with the builder yourself? (or are you one of those people who hate realtors?) You may be paying a lot of "junk" fees. You should be provided a HUD-1 before closing -- at least 24 hours before closing --(but I tell ya, it's sometimes like pulling teeth trying to get it in a timely manner)...by RESPA law, you are entitled.
I used www.iNest.com because I got 1% off the house. I tried negotiating with the salesperson to just give me the 3%. He laughed. So I went with iNest to get the 1%.
I am debating on whether or not to even get title insurance.
What is a HUD-1??
As a mortgage broker myself, I will offer my two cents. I don't think you listed an interest rate that you are going to be paying, and that is at least of the same or more importance than the closing costs. Of the $10k total closing costs, some of that is probably an estimate of prepaids such as daily interest, tax and insurance reserves etc. which often add up to a few thousand dollars on a transaction the size of yours. I suggest you get a few other Good Faith Estimates from other companies just to compare. Then you can start asking questions. The fact that the builder requires you to use all of their own servicers assures me that the $25K of "Free" stuff is being paid for elsewhere in the transaction, or they'd let you use whoever you want for the associated services. As far as mortgage brokers being more expensive, that is a very popular misnomer that I blast away nearly every business day. Through a good mortgage broker you will get an interest rate that is on average 1/2% or more lower than available rates from a retail source such as a bank. There is the added broker fee, but on the vast majority of transactions that I've seen, the broker fee is paid for many times over in interest rate savings. One other important difference is that you see exactly what you're paying on the HUD-1 settlement sheet when you use a broker because all fees, even yield spread premiums paid by the wholesale lender to the broker, must be disclosed. When using a direct lender, you will no doubt be paying a higher rate, and the back end compensation is not disclosed to you. This means you have no idea how much the lender truly earned off of you via the higher interest rate they offered, even though you may have qualified for a lower rate. The best way to cover yourself is to be armed with information like you are getting from this board. Good Luck!
Thanks for the reply and for the others as well everyone!
My thoughts exactly about them making up the "25k" throughout the process. The rate is about 4-5% for the ARM. I am going to refi in about a year or two to get a lower rate. I am only going with them to get the "25k". The will sell it to Countrywide. Countrywide has no points. So Ryland is making boatloads on me. Well, we will see about that. I will arm myself with ALL the info I can get my hands on and confront them with it.
Small world indeed! I just moved from Bel Air, MD over the PA line in August and still run a small mortgage shop in Bel Air . I didn't notice your location before! Let me know if you need help on anything in the future.
$10k is way too-high on that price.
I see this all the time when people come to me after getting ripped off. Standard DIRECT costs for your transaction are, in general:
Appraisal ($275)
Credit Report ($18)
Underwriting Fee ($300-$500)
Tax Service Fee ($75)
Title company closing Fee ($300)
Title insurance ($800 - but state regulated, so don't worry)
Survey ($95, not always needed)
Recording Fees ($70)
Any other charge is a garbage fee. Also, lenders are not allowed to mark up these third party fees.
Other than those costs, you'll need to come up with just over a year's taxes for escrow and proration to seller, and a years homeowner's policy.
If you pay points, why? You're planning to sell or refi soon anyways. So just take a no-point rate.
The "HUD-I" is the closing statement the title company uses to list all costs to buyer and seller, and arrive at a bottom line of costs to you. It is a HUD form that is standard in the industry. There are two pages to it, but we always call it a HUD-I. (Page 2 has all your mortgage costs).
Excellent info!
LOL- "take a no points loan" - They said there is no such thing... That was a riot when they told me that. I am going to be fighting them on the rest of the point that is left after we got them to knock off 1000 from the point.
Here is the complete list, everyone, of the items on the good faith estimate:
Loan Origination Fee: 1% of which we got them to take off 1000.00
Tax Service Fee: 60
Underwriting Fee: 245
Document Review Fee: 395
Flood Certification Fee: 19
Application Fee: 395
Processing Fee: 195
Settlement Fee: 375
Title Search: 175
Title Insurance Binder: 25
Document Preparation: 100
Notary: 20
Title Insurance: 973.92
Lien Cert: 30
Judgment Report: 26
Let me know what you think
The list looks like pretty standard stuff. You'll see most of those items no matter where you go. Good job on getting the origination fee dropped. That's usually the fee that you'll have the most luck getting lowered. One thing that I'm wondering is why you're looking at an ARM when interest rates are at their lowest rate in decades. If you're planning to stay in this house for a number of years, you may want to get into a fixed rate now instead of having to go through the time and cost of a refinance at quite possibly a higher rate in a few years.
Underwriting Fee: 245
Document Review Fee: 395
Application Fee: 395
Processing Fee: 195
I dunno, maybe someone else knows better, but these fees seem a bit redundant to me.
Also - be sure to know if you are locked into the loan for a period of time (1 or 2 years)...and if there are any prepayment penalties.
Don't think there are prepay penalties. Also, on the ARM - the rate is lower and we only plan on staying there 2 years max. We are waiting for some equity to build, then role into something larger to reinvest, or rent the townhouse. If we stay two years we can take the gains tax free I believe. That will allow me to invest in other things as well.