You have found the house of your dreams, have qualified for a mortgage, and are ready to close. Before you do, make sure you know how much the closing costs will be. Believe it or not, you can save hundreds, if not thousands, by carefully studying your closing costs. That money can be used to make your house the true house of your dreams, instead of lining the pockets of your chosen bank or lender.
When you get a loan qualification, you will be given a Good Faith Estimate. This document shows you the terms of the loan and the estimated closing costs. The actual closing costs do sometimes vary, but this is a close estimate. You can use the GFE to compare loans from lender to lender. Be sure to let the lenders know you are shopping around, because they may lower their rates and fees if they know.
So where can you save? Typically you can save on the third-party fees. Some things, like the recording fees and title searches, may be set in stone, but the third-party fees are variable in many situations. For instance, if you have to have a property appraisal, ask if you can find your own appraiser. You may find that the appraiser is quite a bit cheaper than the one the lender chooses.
Some fees are commonly known as “junk fees,” and these are negotiable. Underwriting, processing, document preparation, and attorney fees are these types of fees. While you may not get them removed completely, you can question these fees, and you just may receive a discount on them.
Title insurance is another place where you can save. You must purchase it in order to protect your lender’s interests on the title of the property, but you may be able to find your own title insurance policy, rather than use the one suggested by the lender. Lender’s policies vary, and they do want to be sure that they are covered, but you can ask if the title insurance fee seems high. Also, you can choose to forgo owner’s coverage, because the chances that a title problem will arise are quite small.
When it comes time to close, ask to see the forms 24 hours before the closing date. Compare it to the GFE, and if it is quite different, call the lender to task. There will be some differences, but huge differences likely mean you are paying inflated fees.
Finally, you can save all of the closing costs by asking the seller to pay them. If you have a motivated seller, you may not have to pay any of your closing costs. If the homeowner has a lot of equity in the property, the added closing costs will seem small when compared to the amount they will make on the sale, so they may gladly take your offer, pay the closing costs, and unload the home they are ready to sell.
