Are these 203K closing costs to high?

Question

Hello all, I have recently decided to try my hand at a 203k and see what all the trouble is about. It seems pretty straightforward, as long as you have your contractors in agreeance with your payment terms then you shouldn't have too much of a problem. The only thing that is worrying be a bit is these closing costs. I know 203k is an expensive loan to begin with but does this see correct to you?

Steven Gesis · Answer

Brian-

The goal with a 203k is to get a competent contractor that has done it all before, you can google 203k contractors for your area and see if anyone comes up, typically the guys that have a paid ad or have a strong organic search and populate on page 1 are going to be fairly knowledgeable in the space and most likely have done one in the past.

Yes, the fees are a little higher however, the upside is the fact you are not taking your own cash out of pocket to complete the rehab.

Another bit of advice, is use a general contractor who can bring in the trades so you do not have to have multiple contractors who need to get vetted, write estimates and so forth. It will be way easier. If you ask your lender he/she may be able to give you a recommendation on a contractor.

The secret is the paperwork and a contractor who has the financial means of carrying your project. Many contractors fail at the paperwork level, then the next fail is when they find out they get no money upfront for your job. This is not always the case in regards to the money upfront, it depends on the lawn product if you go with a limited/streamline product or the full/standard 203k (they changed the names of the loans just recently).

Feel free to call me or inbox me, I have a lot of knowledge when it comes to 203k.

#TeamTurnkey

Steven Gesis · Answer

So most of the fees associated with the HUD Consultant and fees associated with your inspection can be rolled into the loan, you should not have to go out of pocket on that. I do not think you will be able to negotiate them out, but you can have them rolled in. Also, you can consider negotiating up with the sellers, ask them to add 2% to your purchase price and have them make a 2% concession, this can eliminate some of your out of pocket expenses. Just a thought and totally legal.

#TeamTurnkey

Michael Cohen · Answer

What kind of work are you looking to do, and how much are you estimating it will cost?

The interest rate - 5+% seems very high, even considering it's a 203K. Also, the various origination fees are pretty high. I would definitely get a 2nd quote from another lender.

Jose Perez · Answer

@Steven Gesis thanks for the good ideas. I'm starting the process with one of these and am looking for ways to minimize my out of pocket expenses. I will definitely bring these strategies to the negotiation table.

Also, do you think it is a good idea to get approved with different 203k lenders to see who gives you the lowest fees?

Brian Beadle · Answer

"Processing fee, supplemental origination fee, underwriting fee, consultant fee, administration fee"

@Mike H.@Steven Gesis

Are these fees negotiable or will they tell me to take a hike?  I understand the consulting fee is probably not negotiable but these other fees are quite vague.

Brian Beadle · Answer

I've heard in the past and from other articles of people seeing similar numbers for their 203k CC so I knew it was going to be high but dear lord, that is alot to bring to the table for an FHA loan. Pushing 20k with my down payment and CC....

FHA allows 6% CC to be covered by the seller so that might just have to happen lol.

Mike H. · Answer

12k for closing costs?

No. That does not seem right. It may be correct. But it sure as heck doesn't seem "right". :-)

I understand some of the fees there that you probably can't do anything with (mortgage insurance premium of 3,400). But that is just a crazy number. I think the lender is milking it a bit. They have processing fee, supplemental origination fee, underwriting fee, consultant fee, administration fee.

I'm seeing 3k in fees. Thats excessive.

Also, does your county/state actually have tax stamp fees that are that high? Thats crazy. Thats 2k right there.

I've never seen 11k in closing costs before.

Steven Gesis · Answer

Happy to help, much luck

Brian Beadle · Answer

Thank @Steven Gesis, The contractors we will be working with are the contractor that our lender has been working with on all his past 203k's so we shouldn't have a problem there.  I just wanted to grab a second opinion on the cost since this is new ground for me.  Appreciate the great advice!

Are these 203K closing costs to high?

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