How Home Buyers Can Lower Closing Costs

Home buyers 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. 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. 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 percent leeway in estimating third-party charges, such as appraisal, survey, inspection and title services, says Peggy Lawlor, a mortgage-strategy executive with Bank of America. Borrowers can reduce out-of-pocket expenditures by wrapping the closing costs into the loan, but lenders will charge a slightly higher interest rate, Lawlor says. 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, she adds. Borrowers should also shop around. Apply with more than one lender to compare origination fees quoted in good-faith estimates, says Greg McBride, chief financial analyst for Bankrate.com. “Be prepared to comparison shop and to negotiate to get the best deal,” he says. 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, Lawlor says. | Read More