Sunday, May 16, 2010
Buying a Home: It’s Easy to SAVE BIG on Closing Costs
I remember when we sold our home in New Mexico and relocated to California!
We learned to save a lot more on closing costs than we ever thought possible.
If you are considering buying a home, shop carefully for lenders and be sure that you negotiate, negotiate, negotiate with the LENDER as well as the SELLER. When discussing closing costs and fees, make sure that you don't over pay. Here are some key "dos" and "don'ts" to keep in mind when negotiating fees and costs with your lender:
Do Ask for a Good Faith Estimate -- Within three days of applying for a mortgage loan, lenders are required to give you a good faith estimate (GFE) on costs. Look at GFE sections 800 and 1100 for the following fees and be prepared to haggle lightly for reductions.
Don’t Pay for Inflated Credit-Report and Courier Fees - Some lenders are charging up to $65 for pulling your credit report. That is unusually high, considering the fact that credit reporting bureaus only charge $6 to $18 per report. Using the same tactics, some lenders charge courier fees for shipping your closing documents for as much as $100, while the majority of overnight express services only charge $22. Tell your lender, up front, that you refuse to pay any more than the going rate for these services.
Don’t Pay for Document Prep and Administration Fees - The origination fee should include these services, so don’t pay them! Ask your lender to waive these fees.
Don’t Pay for Yield Spread Premiums - Lenders increase your interest rate slightly to include origination and other fees so you don’t have to pay them out-of-pocket at closing but some lenders and mortgage brokers are double dipping—by charging both the fees and the higher interest rate. If they advertise "pay no closing costs" then this is what they really mean. Ask your broker directly if a firm charges you a yield spread premium. If so, you shouldn’t pay any additional fees.
Don’t Pay for Padded Title Insurance Fees - When you are shopping for lenders, look for all the above, plus look out for those who don’t tack on a lot of extra charges for services such as title search and document preparation. Theses can add hundreds of dollars to your closing costs and they really should be included in the price of title insurance, which depending on where you live, can be as high as $6,000.
Do Ask for your HUD-1 A Day Early - Federal law requires lenders to give mortgage applicants a copy of their settlement form at least one day before closing, but many won’t give it unless you ask for it. Compare the HUD-1 with your GFE (good faith estimate) and bring any errors to your lender’s attention.
America's Family Financial Expert (R)