Buying and selling a home is usually the biggest purchase someone will make in their lifetime. Take time to research and practice some money saving tips through closing costs. ~JH
When my husband and I bought our first home two years ago, we compared closing costs before we finalized our loan. A couple of companies were offering sizable cash-back credits for going with them. The company we liked best was not.
So I called and asked if they could give us a similar credit.
Turns out, they could. We just had to ask.
Mortgage closing costs have risen 6% over the past year, according to a recent Bankrate.com report—averaging $2,539 on a $200,000 loan. The news is worse for you if you live in Texas, where closing costs are the highest ($3,046). Nevada’s closing costs are the lowest ($2,265). (Then again, nearly half of Nevada’s residents with a credit file are in collections, so maybe you shouldn’t celebrate yet.)
But closing costs aren’t set in stone. “Especially in this market, you can definitely negotiate your origination and lender fees,” says Polyana da Costa, senior mortgage analyst for Bankrate. “It’s like any other service. They have the power to give you a discount.”
Here’s what you need to do:
Get multiple quotes. Going with the first lender you call is like going with the first car insurance quote—there might be a better deal out there. “Get estimates from at least three lenders,” da Costa says. You’re looking for the total package for evaluation—interest rate plus closing costs. You’ll generally be able to get those numbers by providing a few financial basics over the phone.
Compare costs. This is harder than it sounds, since lenders call similar fees by different names, lump certain things together that other lenders list separately, and include and exclude certain third-party costs, such as homeowners insurance. Your best bet is to ask for the GFE form, or Good Faith Estimate, which lists each individual fee. “It’s the easiest way to compare apples to apples,” da Costa says.
Ask about fees, line by line. Have the lender walk you through each charge and discuss what it includes. Some third party charges, such as appraisals and credit report fees, are pretty set in stone. Other costs, such as title insurance, legal fees, and rate lock fees are more flexible. (Title insurance varies so much from state to state that Bankrate doesn’t even include it in the numbers. “It’s something you can shop around for,” da Costa says.) Another charge to eyeball: Courier fees. If the lender hasn’t been sending papers around for signature via delivery service, you can have this one nixed.
Watch for “garbage” fees. “Those are fees a lender will charge that are negotiable, that they can take out or leave in,” says Ziggy Zicarelli, a realtor and president-elect of the California Association of Realtors. These might include things like application fees, underwriting fees, and loan processing fees, among others. If they seem vague, they probably are. Sometimes when you push at the more amorphous charges, they can be lowered or eliminated.
Ask for the discount the other company is offering. Go ahead, pit those companies against each other. If one lender is offering a deal, ask other lenders if they can match it. You may be pleasantly surprised (as I was) when a competitive market results in a smaller bottom line.