Conventional Loan Closing Costs - Analysis

[Juan Pablo Murillo]

I want to start by saying that this is my first deal. This question serves two purposes, to educate myself and to allow others to get valuable and transparent information on closing costs of conventional loans for investment properties.

I’m disclosing the fees on the loan estimate I’ve received from a mortgage brokerage company in Michigan. My business partner and I have made a 65K offer on a 2bd/1ba in the Detroit Metro area. The offer has been accepted. Now we’re dealing with the financing part of the process. Below is some information on the borrowers and the closing costs.

The loan closing costs seem high to me. We're strong borrowers with decent incomes. Please provide constructive feedback if you are able to or upvote if you think this is valuable for other investors.

Borrower 1:

Credit score 775

2017 income of 80K

no debt, no bankruptcy

Borrower 2:

Credit score 750

2017 income of 60K

2K in credit card debt, no bankruptcy

Loan:

• 30 year
• fixed rate
• conventional
• 13K down payment (20%)
• We got approved for a 5.375% interest rate <—— Does the interest rate seem fair or too high?

Total closing costs in Loan Estimate:

$2,977 in Loan costs     <===   Are the loan costs too high for such a small loan? Breakdown below

$2,330 in other costs  

$13,000 in down payment 

($531 in lender credits)

--------------------------------------

$17,776   

Here is a breakdown of the closing costs aside from the down payment:

LOAN COSTS EXPLANATION ($2,977)

A. Originator Compensation

% of loan amount (points) $1,430

B. Services

Appraisal fee $455

Credit Report $59

Flood Certification $8

C. Other Services

Title - premium for lender coverage $450

Title - settlement or closing fee $575

OTHER COSTS EXPLANATION ($2,330)

D. Recording Fees and Other Taxes/Transfer Taxes $70

F. Prepaids

Homeowners Insurance Premium (12 months) $750

Prepaid Interest $130

G. Initial Escrow Payment at Closing

Homeowner’s Insurance $188

Property Taxes $947

H. Real Estate Commission $245