Saving on Buyer Closing Costs
When it comes to buying a home, things can get
expensive, and buyer closing costs are no exception. We
take a look at the best ways to lower closing costs and
whether no closing cost mortgage loans are worthwhile.
Your biggest hurdle may be your down payment when purchasing a home, but it's important to remember
the closing costs. Often disregarded, closing costs can be an unwelcome surprise when finalizing your
home purchaseâ€”and more than likely they won't come cheap.
When buying a new home or refinancing your current home, it is critically important that you're aware of all
the costs involved in your home loan, or it's going to cost you. Closing costs are the miscellaneous fees
charged by those involved with a home sale. You can expect to pay anywhere from 2 to 4 percent of the
total sale price in closing costs, depending on your unique situation. Mortgage loan closing costs can be
excessive, but if you're prudent, you can save thousands when it comes to finalizing your loan.
Unfortunately, many new homebuyers just accept the exorbitant list of closing costs fees as an inevitability
of the process. The experience can be a bewildering one for these individuals. They don't want to risk
their American dream on a few unsubstantiated costs. But, it doesn't have to be this way; understanding
the process can help you save.
Closing costs are separated into two categories: non-recurring closing costs and recurring costs. Below
is an assortment of both the non-recurring and the recurring closing costs you may be expected to pay.
Non-Recurring Closing Costs
Recording Fees (local fees)
Transfer Fees (county/city)
Recurring Closing Costs
Private Mortgage Insurance
The non-recurring closing costs (junk fees) stated above can be negotiated
down or eliminated entirely. With a little bit of discernment you can come to the
bargaining table prepared. Some of the recurring closing costs mentioned
would be dependent on your individual situation. You may live in an area where
flood insurance is not required. Or your circumstances may not warrant private
When you begin the loan process, it will go something like this. Along with your
loan rate and information, your lender gives you a list of expected fees, called a good faith estimate
(GFE). Required by the Real Estate Settlement Procedures Act (RESPA), the good faith estimate must
be provided to you, the borrower, within three days of taking your loan application. The intent of the good
faith estimate is to give you a closing cost estimate. The problem with any GFE is that the lender isn't
required by law to stick by the fees stated within the GFE. This allows some of the more unscrupulous
lenders to add new fees before closing. Make sure that any fee changes or unexpected surprises are
explained and justified by your lender.
When reviewing the GFE, you can find the fees structured in the following range of numbers: 800â€™s, 900â€™s,
1000â€™s, 1100â€™s, 1200â€™s and 1300â€™s. A good tip is to take a look at the 800 section. This is where most of
the negotiable fees are located. These include (but aren't limited to) application fee, commitment fee,
document preparation, underwriting, and processing. This is where you should focus your negotiation
efforts. Some of the items in the 800 section are third party fees, and though they may not be negotiable,
they should be passed on to the borrower without markup.
It also pays to proceed with caution when it comes to brokers touting no closing cost loans. Theoretically,
there is no such thing as a no closing cost mortgage. As altruistic as many lenders may be, they still need
to make a profit. So, make no mistake, the borrower foots the bill, one way or another, by either paying
now or in the future, through higher rates.
A no closing cost loan may help you avoid the non-recurring closing costs, but they'll do so at a cost, the
cost being a higher interest rate. And while there may not be any lender fees, you'll still have to pay for the
title search, title insurance, home appraisal, credit check and other possible charges.
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