Buying a home is a process. After finding the right house and getting the loan started comes the mortgage closing. With paper upon paper filled with legal jargon, it is often easiest to just sign away and get the keys to your new place. Unless you have done some homework beforehand, the closing costs are basically what the lender says they will be. But with a little bit of prep, you can find yourself reducing mortgage closing costs and paying considerably less. You will now be able to enjoy your new home knowing you got the best deal possible.
Costs do vary by state due to regional price differences and state laws, but the majority are pretty standard.
This is important in reducing mortgage closing costs since one of the biggest portions of the closing costs happens at the title office. Getting all the papers filed correctly, and making sure there are no errors, does not leave much for negotiation. In certain states the title has to follow local laws and can often only charge for the title fee, title insurance, and state filing fee. The rest of the costs come from the lender’s office. As the borrower, your only option with the title company is to shop around and find out which one will offer the best deal.
The easiest way to find the best deal is to get quotes on the fees from several different lenders. While this can hurt your credit score due to too many requests, it should not drop it dramatically. If all the requests are done within a short period of time, you can still get their loan at the best rate possible before the too many requests deduction reduces your credit score.
According to smartmoney.com there are certain parts of the lending process that are basically set. Those are usually anything that is offered by a third party. So items such as the title search, attorney fees, credit reports, and appraisals most likely will not vary. Anything that is done in house by the mortgage lender is negotiable.
Negotiating with Potential Lenders Over Closing Costs
The rest of the closing costs are made up from underwriting fees, application fees, settlement costs, and a handful of other subjective paperwork items. After you have received a few estimates from various lenders you can start the negotiation process.
With at least 6 good faith estimates the homebuyer holds the power. You can look at your estimates and learn what the lowest rates are for each item. If one lender is higher in a certain area, you can negotiate the price down by using your willingness to go to another lender as your leverage. The biggest thing is to remember there is no harm in negotiating. A lender will never raise its prices because you asked for something lower. Plus, you always have a backup. You must be willing to walk away if something does not seem right, or if the lender simply will not work with you to reduce your costs.
Finding the right house is the fun part. Reducing mortgage closing costs is work. With a little bit or research and having comparisons on hand, the negotiation can be fun, and in the end you will know that you got the best deal and did not leave any money on the table.