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Closing Costs and Annoying Fees (and I made an offer on a house)

On Sunday, after coming back from my school’s Spring Carnival (which was a weekend of drinking, revelry, and catching up with old friends) four hours away, I went on my second house-hunting trip. This time though, we saw two (three, but one of them was identical to the other one) places that we liked out of five total. One (and it’s twin) was $312k ($315k) and one was $290k. The $290 was in Columbia near a Safeway, nice area, very convenient access to major roads and the home’s layout was great. It had three bedrooms, two full and two half baths, a partially finished basement (finished except for the storage room where the boiler was), and a nice deck and lawn outside.

In writing out the contract, I began to get a little taste of the “other” fees I could expect if these things go through. There are a whole bunch of fees but only one specific to Century 21, who my agent works for, so far. A $195 administrative fee surprised me but with respect to the overall price of the house, it’s just a minor footnote. But still… unexpected is still unexpected. I don’t know if that fee is considered part of “closing costs,” the nebulous “everything else fees” no one really knows how to quantify for me, but I suppose we’ll soon find out.

“Closing Costs”:
One part of closing costs that is quantifiable is a Maryland transfer tax, which is about 1.5% of the value of the home. In the contract, we stated that the buyer and seller would split the costs and I, as a first time Maryland home buyer, would get a credit in the range of $725ish. As a first time buyer, I would be exempt from half of the State Transfer Tax (0.25%, or $725 on a $290k). With the home in Howard County, the Recordation Tax is calculated at 0.5%, the County Transfer tax is 0.5%, and I’d be subject to a lien certificate, which has a fee of $25-$55. So let’s ring of the cash register and we’ll come up with total Transfer and Recordation taxes of $2,955. And that’s not even all the closing costs… just the transfer and recording costs. Nothing dealing with the loan and its fees has been considered yet.

It doesn’t appear that any of those fees are related to the mortgage itself. All the mortgage products LendingTree have listed the following fees:

Fee Amount
Tax Service Fee $45
Underwriting Fee $375
Processing Fee $375
Document Preparation Fee $175
Credit Report $25
Total $995

In talking with Diane, my “Home Buying Specialist,” those charges are all the ones the lender will charge me. Everything else is out of their hands and some of the fees they do list (so you know about them) are title insurance and recording fees (detailed above).

I gave Diane a call to ask her about setting up an 80/10/10. That would be 80% first mortgage, 10% second mortgage, and 10% down. The reason for this would be for me to avoid paying private mortgage insurance [3] (PMI) which would cost $67/month ($804 yearly) and because originally I hadn’t considered closing costs when asking for the loan.

Going on Friday’s rate (4/15) and with a lock-in of under 30 days, we’re talking rates of 5.875% on the 1st mortgage and 7.25% on the 2nd mortgage. A 5/1 ARM rates would be around 5.25% on the 1st, so we’re talking 0.6% difference to take the risk of living there only 5 years (or bracing for judgment day). Bankrate’s homepage rate was listed at 5.56%, a couple ticks lower than LendingTree’s rates, which means a visit to my credit union today around lunch is probably in order.