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Looking for help analyzing closing costs- first Investment property!
Hi, I am newly under contract for my first investment property, a duplex we plan to live in and rent out.
I just got the first estimation for my loan/closing costs, looking for any assistance on analyzing if these costs make sense. I'm a newbie so not trying to be taken advantage of.
I'm financing 171k and using a 5% conventional loan while also taking 5% DP assistance through OHFA.
I do notice I got charged a Loan Origination fee twice, each for $855, I'm feeling that shouldn't be the case. I was told by my lender that these costs should come down more as some of the title fees are conservative estimates at this point. Looking for any insight as I originally expected only to be total out of pocket under 5k, thanks.
Hello Austin,
I would definitely ask the lender about the 2 line items for loan origination, though 855+855 = 1710 which is exactly 1 point of 171k. Why they broke it up twice is beyond me. I assume you have a 1 point closing fee. All the other junk fees your stuck with, there is no way around it. That's what it costs to get your money and the lender gets 900 dollars to fill out a template, another 900 to fill out an excel sheet, and pockets the spread on the appraisal. They have to make money somehow too. At this point either find another lender with lower fees or just deal with the costs of closing. They are escrowing taxes so you have to put that upfront as well which is sometimes standard. Everyone talks about the BRRRR noone talks about the extra closing costs.
Quote from @Austin McDonald:
Hi, I am newly under contract for my first investment property, a duplex we plan to live in and rent out.
I just got the first estimation for my loan/closing costs, looking for any assistance on analyzing if these costs make sense. I'm a newbie so not trying to be taken advantage of.
I'm financing 171k and using a 5% conventional loan while also taking 5% DP assistance through OHFA.
I do notice I got charged a Loan Origination fee twice, each for $855, I'm feeling that shouldn't be the case. I was told by my lender that these costs should come down more as some of the title fees are conservative estimates at this point. Looking for any insight as I originally expected only to be total out of pocket under 5k, thanks.
Congratulations,
These costs look reasonable, but as you mentioned a double origination fee that they'll remove, so all good. You didn't mention the interest rate or FICO score though, so that can be reviewed too.
- Typically, the loan origination fee is a one-time charge that covers the lender’s cost of processing the loan. Seeing two charges for $855 sounds unusual, so it’s worth questioning your lender directly. Double-check whether one of those fees could be mislabeled or duplicated by mistake.
- Since you're using OHFA’s 5% DPA, you should expect some additional fees related to that, like possibly higher closing costs or mortgage insurance. However, if these aren’t itemized clearly, it’s worth asking for an explanation from your lender to make sure you’re getting the full benefit of the assistance.
- Your lender mentioned the title fees are conservative, which means they might come down closer to closing. Title insurance, settlement fees, and recording fees can vary, so you could request updated estimates as you get closer to the closing date.
- If you’re expecting to stay under $5,000 out of pocket, double-check the loan estimate to ensure this aligns with your DPA and the amount you're being asked to bring to the table at closing. Your closing costs should be clearly broken down.
Quote from @Austin McDonald:
Hi, I am newly under contract for my first investment property, a duplex we plan to live in and rent out.
I just got the first estimation for my loan/closing costs, looking for any assistance on analyzing if these costs make sense. I'm a newbie so not trying to be taken advantage of.
I'm financing 171k and using a 5% conventional loan while also taking 5% DP assistance through OHFA.
I do notice I got charged a Loan Origination fee twice, each for $855, I'm feeling that shouldn't be the case. I was told by my lender that these costs should come down more as some of the title fees are conservative estimates at this point. Looking for any insight as I originally expected only to be total out of pocket under 5k, thanks.
First and foremost, congratulations! You're entering into a phase of the investment journey where you want to strike a balance between proper due diligence and avoiding last minute analysis paralysis. Good for you for reaching out for some opinions!
Your number look reasonable to me! I'm not familiar with investing in your area, but the insurance in particular appears very reasonable compared to the costs I see in OKC.
As a rule of thumb on a run-of-the-mill purchase with traditional financing, I usually plan on coming out of pocket about 3-4% of the purchase price above and beyond the downpayment. When adjusting for the DP assistance you mentioned, you seem to be approximately in that range! Congrats again and good luck!