Tips for Lowering your Closing Costs

imagesIt’s closing time: Last call for every entity with even a small role in a home sale to collect their fees.  Home buyers—eager to get the keys to their new place—must first cover myriad costs, including agent commissions, attorney fees, lender fees, mortgage insurance, a title search, recording fees, real-estate taxes, survey costs and an appraisal (sometimes two on a jumbo loan).  Closing costs can vary depending on which lender is used, what state you live in, the price of the home and even the day of the month the closing takes place. Jumbo-loan borrowers—where amounts exceed $417,000 in most places and $625,500 in high-cost areas—often face the steepest closing costs because many fees are calculated using a percentage of the loan amount. But a little research and comparison shopping can help buyers reduce these out-of-pocket costs.

Borrowers can get a sense of what they will owe in the good-faith estimate document, which federal law requires lenders to provide within three days of the loan application. Lenders cannot change their own origination fees, but they are given a 10% leeway in estimating third-party charges, such as appraisal, survey, inspection and title services.  Title insurance also can vary widely across the U.S.—and even by type of home.  The day of the month when the mortgage closes can also affect costs.  If you close on Nov. 5, you have to pay the per diem interest from the 5th to the 30th, but if you close on Nov. 28, it’s only three days.  Borrowers can also reduce out-of-pocket expenditures by wrapping the closing costs into the loan, but lenders will charge a slightly higher interest rate. When considering that option, borrowers should balance how much cash they can bring to the closing table versus how long they plan to stay in the home.

More Tips that May Help Lower Closing Costs:

• Shop around. Apply with more than one lender to compare origination fees quoted in good-faith estimates.  Be prepared to comparison shop and to negotiate to get the best deal.

• Relationship discounts. Lenders may offer lower origination fees for their customers.  For example, Bank of America just rolled out a “Preferred Rewards” program that offers up to $600 in reduced rates depending on the dollar amount of a customer’s deposits.

• Closing attorney. Many borrowers stick with a lender-appointed attorney to represent them at the closing, but they are not required to do so and can hire their own.

• Title insurance. Some states require a borrower to use a lender-selected title insurance provider, but not all states do.

-From The Wall Street Journal