Ways to Save $500 or More on Closing Costs
If you’re interested in buying a home or refinancing an existing mortgage, you couldn’t pick a better time with interest rates at historic lows. But, before you seal the deal make sure you calculate closing costs – since they can really add up. These days average closing costs are estimated at $3,754, according to Bankrate.com, and while that figure is actually down nearly 7% from a year ago, here’s how you can get it even lower.
Ask For a GFE By Name. The road to lower closing costs begins with the Good Faith Estimate (or GFE). Loan originators are required, since 2010, to provide consumers with a standard HUD-created GFE form. The GFE lists all fees associated with the loan and is designed to help borrowers compare costs. Lenders are only required to provide a GFE within three business days of your loan application but start shopping for the best deal by requesting it early in the process. Other fee estimates aren’t binding so be sure to ask for a GFE by name. You’ll avoid costly surprises because under new laws, lenders must pay any excesses above $50 on quoted costs.
Choose Your Lender Wisely. An origination fee is the lender’s charge for services rendered. It’s non-negotiable on your loan but varies between lenders. With a GFE in place, you can best compare costs. Expect to pay origination, processing and underwriting fees for the work done on your loan. Some lenders may promise zero closing costs but that usually means a higher interest rate. Never pay however common lender markups like application or “commitment” fees that can add up to $500 to your closing costs. If they show up on your GFE, ask your lender to remove the markups. If he won’t, find another. The best choice will have a good balance of interest rate, lender fees and points on the loan. Compare them using lines 1-4 of your GFE.
Negotiate Third Party Fees. You’ll find real savings on line 6 of the GFE. These fees are for third-party services. Your lender will list service providers along with their fees on the GFE but you’re not limited to them. Shop around for: appraisals, surveys, couriers, an attorney, title and inspection services. Prices vary by state but what they have in common is that they’re negotiable. Real estate broker Eugenia Foxworth of Foxworth Realty suggests seeking referrals from your broker. “Attorneys’ flat fees, for example, can range from $900 to $3,500 in New York,” she says. “Ask your realtor to refer someone that specializes in the area and benefit from their established relationship.”
