Purchasing a home is one of the biggest financial moves that most individuals ever undertake, although it is also one of the most rewarding. Unless you can afford to pay cash for your home, you are going to need a mortgage to buy the property. While most consumers are familiar with the interest charges that will come with the mortgage, many don’t pay much attention to the closing costs that are charged as well. Closing costs can amount to a very big chunk of money that you have to pay on the front end of the deal. Although closing costs can definitely add up, there are steps that you can take to minimize these charges. Here are a few tips on how to cut back on closing costs.
Ask for an Explanation of Costs
When you apply for a mortgage, the lender will typically give you a document known as a “good faith estimate.” This estimate includes information about all of the closing costs that you will be charged. When you receive this estimate, you should ask the lender to explain each one of the closing costs that you do not understand. If the loan officer that you are working with does not offer a good explanation, or there is not really a legitimate reason for the cost, ask if it can be removed.
Identify Unnecessary Fees
Many lenders try to throw in “trash” fees that really have no place being charged. They catch many unsuspecting borrowers off-guard and end up making a lot of money because of it. For example, if you are charged excessive documentation or preparation fees, you should ask them to be reduced or removed.
If they charge you inspection fees, commitment fees, or any other unexpected fees, you should ask them to take them off. Also, check for fees that you may have paid, such as the appraisal fee.
Get Seller to Pay
Another way for you to significantly reduce the amount of closing costs that you have to pay is to ask the seller to pay them for you. In many cases, the seller will agree to pay your closing costs for you, if you can close on the house quickly. The seller may just discount the house price the appropriate amount or bring a check for you to the closing.
Double Check Actual Costs
In some cases, there can be a difference between the actual costs that a lender charges and the good-faith estimate that they gave you. Some lenders try to add in extra fees or change amounts between the time they give you the good faith estimate and the time you close. When you see the actual closing costs, make sure that they total up to the same amount that you were given on the good faith estimate.
Shop Around
You should also spend some time shopping around for loans from multiple sources. Not every lender charges the same amount or closing costs on a mortgage. If you will take your time to look at several lenders, you should be able to get a good idea of what you should be charged. You can use the good faith estimates that you receive as a tool to compare one lender against another. They can also be used as a negotiation tool. Lenders will sometimes negotiate the closing costs when they see that a competitor is giving you a better price.
With these tips in mind, you should be able to significantly reduce the total amount of closing costs that you have to pay your lender. Just make sure that you don’t forget about getting a low interest rate on the loan also.
-Provided by RefinanceMortgagerates.org. If you’re already a homeowner, visit their site for information on no closing cost refinances that do away with additional fees.
Money saved is equivalent to money earned. You should always check all the costs before paying. Doing your research before lending the money is very important.