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Closing costs on a one-time close construction mortgage too high?

We are in the process of purchasing a lot ($155k) and building a home ($350k) and going with a 90/10 ARM during the construction phase and whill convert to a 80/20 Fixed upon completion of the home.  The loan amount is $404k and closing costs (origination, title policy, survey, construction, appraisal, recording, etc.....) are coming in around $12k (does not include any prepaid taxes), so around 3% of the overall loan value.  At a first glance this seem hight to me.  But our last home loan was for $170k so I know this wouldnt be an apples to apples comparison.  Is this average for a construction loan or too high?
  • June 22 2012 - Dallas
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Answers (10)

36k is a Complete ripoff. A big issue is a modular home. You may not be getting the same rate as you would on a conventionally built home. Do not build or borrow until you understand all your issues with lending and building completely, or you may find out you have been completely ripped off. I have been in real estate and construction for over 30 years and have never heard of such a cost to fund a home.
  • 1 day ago
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I am happy to give you a real estimate. I can't post my phone number or email address here, click on my picture and you will see my email address. 
  • December 05 2013
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Right?!? it is an 1/2 acre in Monroe County FL, 33040. And we have perfect credit.

Thanks for your feedback.
  • December 05 2013
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User 8981187, you are getting crazy figures, both the Closing Costs and the estimated monthly payment. What is the Lender's name you are dealing with? The only way the payment would be $2800/month is if the taxes on the property are $10,000/year and you are using an AG loan due to excessive acreage. . How many acres are you looking at and what is the subject property zip code ?
  • December 05 2013
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Thanks for your feedback but a bit disappointing. A $300,000 house is going to cost us $2800 a month. We pay $1,600 now in rent and were willing to go as high as $2200-2300. But $2800 is out of our budget... Do we have any other options or do we walk? We do not want to be house poor!!

Question- Should we get a second opinion for the mortgage? Who are the "experts" other than the bank we are dealing with?

Thanks!
  • December 05 2013
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user 8981187, do you have a Good Faith Estimate? If so, what is the loan amount and adjusted origination figure in Box A?
  • December 05 2013
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It seems outrageously high to me, too. Where is the house?
  • December 04 2013
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We are trying to close on land ($110,000) and a modular home ($200,000) and applied for an FHA construction loan. The bank is charging us almost $36,000 in closing fees? Seems outrageously high... thoughts?
  • December 04 2013
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Profile picture for Gulf StatesFinancial
I agree. It is true that closing costs on a Construction-to-Perm loan are going to be higher than a regular purchase or refinance loan.  The main cost difference will typically be something like a "draw inspection fee" or a "construction administration fee".  I have seen it termed a few other things over the years working for various banks but this fee is charged by the lender so that when the builder or builder's sub requests payment for work completed per the draw schedule, the bank sends an inspector to make sure the work has been completed and they will release these predetermined funds.  Truly this fee protects you, the bank, and really is a good thing. 

Also depending upon the length of time needed to complete the project some lenders will charge a fee for locking the end loan if they even allow you to do that or they may build-in an origination fee (say 1%) to protect themselves against rising interest rates.

The fact is if you were to have two closings you would likely pay more than 3% for the money.    


 
  • July 10 2012
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Sounds close to normal. Break the fees down so the experts can analyze them.  Construction loans require fees that aren't required for normal purchase money loans.
  • June 22 2012
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