First time home buyer..short on closing costs need advice

[mich73]

Im posting this for my mother. I will give some background so maybe that will help.

She is trying to buy her very first home, she is widowed and on disability. She has a 16 yr old as well. Im working on cleaning up her credit. Her transunion score shows 609. She has 4 bad items on her credit, 3 of which are paid judgements that wont come off for another 5 years. One I am in the process of disputing.

Her monthly payments showing on her credit report are $222, balances owed are less than $5k. She has a bankruptcy from a few years back.

She is supposed to go to closing on May 17th for a home she is buying in FL. We live in VA. She is paying cash for the home, the house sold for $40k. The home was a bank repo, being sold as is. The problem she is having is that she did not anticipate the closing costs being so much. She needs another roughly $7k.

She is in the process of trying to sell things to help. However, as the date approaches she is concerned she wont have the money needed. Its $50 per day extra if she postpones the closing.

She is thinking she may need to get a loan for the remainder of the closing costs.

What advice would you give to her? Since this is her first time buying, we are not sure if there are other avenues we are not aware of. I dont think the bank will pay any of the closing costs from what her realtor has said. Do you think its even possible for her to get some kind of loan for this?

Thanks

Michele

[Denita]

Closing costs for a foreclosure in the amount of $7k on a $40k cash purchase are completely out of line with actual closing costs in Fl.

Post exactly what the HUD (closing statement) states. Because this is a cash purchase the HUD/closing statement should be completed by now. Post each itemized cost. It really sounds like your mother is getting ripped off by someone in the transaction. Because she is not financing her purchase most of the closing costs don't apply to her!

If the closing statement is not yet prepared, then call first thing tomorrow to the settlement company (attorney or title co) and get them to prepare it. It normally only takes less than an hour to prepare the buyer side of a cash transaction (really only a few minutes). If the closing co is unwilling to provide it right away, something fishy is going on with the sale.

[mich73]

She said she dont think she has the HUD closing statement. The bank that owns it is Caldwell Bank. Part of the money she is short and needs a loan for is where she is a little short on funds for the money for the house. This is what she told me she knows:

House $40k

The DOC fees (not sure what this is) and closing costs one is $1800 and the other is $2200

Shes not sure which is which.

Its a Hold Harmless (whatever that means)

she is going to email me whatever info she has and I will post what info you need if she has it.

Do those fees make more sense?

[Denita]

I don't understand why they have quoted you such high fees.

To give you an idea of what your closing costs ought to be, look at the following (costs less than $750 total for a normal cash closing on a $40k deal on the buyer side):

Settlement fee: Typically $250 to $400 This is a title co charge

Seller usually pays title, unless you agreed to pay it in your contract. A normal title fee is $5.75/1000 in coverage. For a $40k deal that is $230

There are recording fees for the deed based on the sales price, in this case about $80 to $85. This is a normal buyer cost.

There are doc stamps based on the sales price, usually paid by the seller. Look at your contract, if you have to pay them expect about $300 in costs

There is a Tax and Lien search fee also paid by the seller. Normal seller cost on this is $50 to $150.

She normally would also buy her homeowners insurance for the effective date as of the closing date. This she pays directly to the insurance company and is not included in closing costs on a cash purchase.

Your mother should get a credit for the real estate taxes from Jan 1 2010 up to the day of closing. The estimate for this credit would be based on a per diem rate using 2009 tax.

Edited May 2, 2010 by Denita

[mich73]

So basically, your saying she's being overcharged? And it doesnt matter that the seller is a bank in relation to who typically pays most of these costs, correct?

So what she should do is get that copy of the HUD closing statement tomorrow. If she has already signed a contract and agreed to pay all these fees herself, is she SOL?

[Denita]

So basically, your saying she's being overcharged? And it doesnt matter that the seller is a bank in relation to who typically pays most of these costs, correct?

So what she should do is get that copy of the HUD closing statement tomorrow. If she has already signed a contract and agreed to pay all these fees herself, is she SOL?

YES. She is being overcharged. The contract will specify who pays which closing costs. Sometimes banks that own the property do pass closing costs to the buyer, but even then, those costs are out of line with what the seller/buyer would pay. First look at the contract and determine which costs she has agreed to pay. Then get the closing statement from the title co/attorney to find out the actual fees being charged to her. Are those fees specified in the contract? Do you have a real estate agent handling this or did you buy directly from the bank?

[mich73]

From what I understand, she has a realtor that is handling it all. but I will double check.She is sending me what she has by email, so I will read over it and see what I can find out. Thanks for the info thus far.

Edited May 3, 2010 by mich73

[befranktome]

Also, check with the county that she is buying the home in, under first time homebuyers program, some of the counties have a program set up to lend the 10% IRS tax credit funds in advance. As long as it is paid within a certain time frame, no interest. On a 40,000 home she will be getting $4000 from the IRS.

[Denita]

OP, were you able to review the contract and the closing statement to get clarification on the figures?

[mich73]

Sorry for my delayed response. I just got out of ICU...apparently my dentist hasn't heard of a new medicine called Antibiotics when pulling an infected tooth.

I spoke to her and she sent me all she had via email, she asked for the HUD closing statement to which noone provided it to her. She emailed several people that she knew was dealing with this. The realtor said he knew of no such thing, asks like hes a newbie to this house selling thing. I think he taking her for a ride. I did see in the original contract the seller was to pay closing but then the added an addedum indicating she was to pay them.

[jq26]

This sounds fishy.....a HUD is standard. Get it and go through it line by line. It should reflect exactly what you were expecting.

Denita is 100% right. The costs you posted above are high. Are you including into that $7k amount the following year's taxes & insurance, etc. etc? Get the HUD and list fees line by line, including the line #.

[Denita]

If your Realtor does not know what a closing statement is, then you have a problem. The closing statement does have several names - some people call it a HUD or HUD1, some call it a settlement statement others have local names for it, but every transaction (sale/purchase) has one. You are supposed to get the closing statement before the closing. When you have a cash buyer the buyer side can be ready very early because there are no lender fees to add to the closing statement.

If your Realtor still does not know what I am talking about, have the Realtor go to his broker so his broker and explain what one is and help him get the HUD/closing statement/settlement statement for you before closing. You need to have one to find out what your actual expenses will be at the time of closing. If you wait until the last minute it does not give you enough time to renegotiate those costs.

[jq26]

You are supposed to get the closing statement before the closing.

Back in the hayday of easy money mortgages (2002-2006), brokers would hold these statements back as long as they can so you couldn't see the garbage fees being rolled into the settlement. I had a broker pull this on me early in '07. It was ruthless because by the time you see what's on there you already have a table full of peole waiting for you and the pressure to close is great.

Don't let that happen to you. Let your lender/settlement agent know that you want the HUD1 at least 48 hours prior to closing. If you post fees line by line, I am sure someone will respond with what is reasonable.

[mich73]

Thanks so much. Im gonna tell her what you all have said. See if she can get it, It should be ready because they are wanting to close early so why wouldnt they have it.

[veteransadvocate]

Definitely check and see if there are any tax credits available