Amount needed for mortgage - First time buyer = DUH

Asked by Alvy, Wantagh, NY Mon Oct 15, 2012

We are hunting for a house and looking at several properties, this is what was told to me by our agent and I just wanted a public and professional opinion if it seemed accurate. If we get an accepted offer of $400k on a home and wish to put down 20% we should also add onto that an additional 6% to cover Realtor and closing costs (I know this can vary but 6% is a guesstimate) This means I would need on hand ($80k (20% down) $24k (6% closing) ) $104k total. Does this seem correct?

What other fees can I expect? $12k seems like a lot of money for the Realtor, especially since I found the house, he's a nice guy but it's a lot of money. How does this get negotiated?

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Janet Nation, CBR’s answer
Janet Nation,…, Agent, Baldwin, NY
Tue Oct 16, 2012

To keep it very simple, here's how it will work. In addition to your 20% down payment, there is an additional expense for your closing costs which is approximately 4-5% of the loan amount. Your loan officer will give you what is called a Good Faith Estimate, this sheet will give you an estimate break down of your closing costs

The other typical out of pocket expense in our market place will be for your home inspection, appraisal, survey and attorney fees totaling approximately $2000.

Your agent and everyone else for that matter will be paid from the proceeds you bring to the closing table, no additional or separate funds will come out of your pocket to pay the agent. I suspect you misunderstand your agent regarding closing costs and fees.

If this transaction does not work out for your, get a better education on the mortgage process and consider working with a buyer’s agent that you feel comfortable with. That agent will work in your best interest, educate you on the process and give you the service you deserve.
2 votes
De Vonte Wil…, Agent, East Point, GA
Mon Oct 15, 2012
Hwllo Alvy. Generally, the Seller is the one who pays/compensates the Buyer's Agent for finding the Buyer. In actuality, you are getting free representation. However you should factor in closing costs, because they are often an expense overlooked.

Your typical closing expenses will include the following;

1.) Attorney fees, surveys, recording fees, title insurance premium
2.) Homeowner's Insurance
3.) Mortgage Fee's (including; application fee, appraisal, PMI, points, miscellaneous,etc.)
4.) Home inspection/other inspection costs
5.) Prepaid tax, Flood Insurance (if applicable), etc.,

You could also consult a mortgage advisor and ask for a complimentary Good Faith Estimate, given the above scenario.

I hope this answered your question! If you have any further questions, please feel free to contact me by the ways below.

Wishing you the best of luck,

De Vonte Williamson
Licensed Real Estate Salesperson
Proudly Serving Long Island
Coldwell Banker Residential
Mobile: (631)384-3695
"I Stand Behind Getting You Results!
0 votes
, ,
Wed Oct 17, 2012
Good morning Alvy,

You really want to consult with your Mortgage Banker for the best estimate of closing costs on this transaction. Closing costs are ALL the fees you pay associated with purchasing the home including:

-Home Inspection Fee
-Appraisal Fee
-fees you pay your Lender to apply for the mortgage loan
-title fees including searches and insurance and Survey
-New York State mortgage tax
-County Clerk recording fees
-first year of Homeowner's Insurance
-your Attorney fee escrow deposits to create your escrow account with your Lender for property taxes and homeowner's insurance
-the oft-hidden closing cost in Nassau County: the adjustment to the Seller for property taxes already paid.

In general, if you're getting a NO POINTS loan from your Lender, then your total closing costs should be roughly 4-5% of the mortgage amount, not counting the property tax adjustments to the Sellers. Expect to pay roughly 8 months worth of property taxes at closing for your escrow deposits with your Lender AND the adjustments to the Seller.

As far as paying Realtor fees: why would you do that? The Seller typically pays the real estate commission, not the Purchaser. The exception to this rule would be if you hired a Realtor as your Exclusive Buyer's Agent and you are required to pay a portion of the real estate commission to your Buyer's Agent that's not covered by the Seller's MLS commission split with the Listing Agent.

Bottom line: for the best assessment of your closing costs speak to your Mortgage Banker, not your Realtor.

Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
0 votes
Annette Levi…, , New York, NY
Mon Oct 15, 2012
As noted the seller pays the realtors' commission. As far as closing costs, wasn't this given to you with your preapproval? Your loan officer goes over closing costs with you.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Mon Oct 15, 2012
Be aware that a mortgage pre-approval letter is required in order to determine your price range and for any offers to be taken seriously, therefore if you haven't done so yet visit with any licensed officer. You loan officer can provide a good faith estimate regarding closing costs. As for the commission--generally it's paid by the seller at closing out of the proceeds of the sale, if two agents are involved the fee is shared; unless you have an agreement with your agent to pay above what is being offered....
0 votes
Maria Gilda…, Agent, Manchester, CT
Mon Oct 15, 2012
Good Morning: I can understand the 6 percent being added to your out of pocket to cover the closing costs but what I am not clear about is the realtor's costs.

Is the house listed in the MLS? Normally, the listing broker pays the selling broker. This is through the unilateral agreement wherein the listing broker agrees to pay the cooperating broker a fee for bringing a ready, willing and able buyer.

At least, this is the norm in Connecticut.

Perhaps, other professionals can chime in.
0 votes
FYI - I don't know the breakdown of where the money goes - I was assuming 3% for the Realtor - this could be wrong! Is the 6% closing costs and my figures accurate though?
Flag Mon Oct 15, 2012
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