Did you ever wonder if the closing costs your mortgage broker proposes can be lowered? Whether you have or not, this article will provide you with 4 ways easy to minimize your closing costs.
1. Examine your Good Faith Estimate and make sure you understand what each fee is for. Seems straightforward but many people do not do it. Sometimes, they do it long after the fact. You must do it before. Preferably a few days before, not minutes before.
You should always get your closing costs estimates on the Good Faith Estimate form. Its a standardized way of showing you what fees you are going to be charged. Since its standardized, you can easily compare one mortgage brokerages closing costs estimates with those of another.
The closing costs are finalized on HUD-1, a form that you should have in your hands and inspect (compare it against the Good Faith Estimate form) several days before the closing.
2. Now that you understand what all the fees are for, make sure you don’t have there fees that you’ve already paid and are not given credit for that. Maybe you paid the appraisal fee upfront. This fee is part of your closing costs and it should be on the Good Faith Estimate as having been already paid if you did, indeed, already paid it.
3. Mortgage brokers (lenders too) have a number of third parties they have to work with to make a mortgage loan happen. Some, like title companies, they choose. Others, like the city and county you chose when you chose your home. Though theres nothing you can do about the county or city fees, it doesn’t mean you have to pay the other fees. For instance, if you have a title company that is reliable and willing to charge you less, work with that company.
4. ‘Lender’s Inspection Fee,’ ‘Commitment Fee’ and other such fees. Some exist only so that the mortgage broker or lender makes more money. Others exist so they don’t waste time with tire kickers. Make sure all such fees are absent or waived if there’s a closing.
Until May 2011, mortgage brokers and lenders are still allowed to charge you a yield-spread premium. Thats the extra fee they get from the bank (lender) if they get you into a mortgage with a higher interest rate than the wholesale rate you qualify for. Mortgage brokers (unlike banks) have to report this extra fee if they get it. Make sure to look for it.
The only time you should be paying extra is if the mortgage broker is going to use the fee to lower your interest rate (buy down the rate) or to pay your closing costs with it.
Refinance closing costs are lower than the closing costs for a first mortgage. They still run into the thousands, you can still overpay by a few hundreds. Make sure you understand what you’re paying and that the HUD1 form and the Good Faith Estimate form are in agreement.