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As every investor knows, the closing costs can impact the project. When you apply for the mortgage, the lender is obligated to provide a good faith estimate of the closing costs within three days after accepting the application. However, these are only estimates and often the lender will raise fess at the last minute. Like every other aspect of the purchase process, some closing costs are negotiable and there are steps the buyer can take to control those fees.
Remember that there are certain expenses not listed on the good faith estimate. Those expenses include the state mortgage tax, homeowners insurance and the property taxes which may be required to be held in escrow at the closing. Buyers should inquire about these rates and the lender’s policy regarding these expenses.
Closing cost irregularities do occur. The U.S. Department of Housing and Urban Development has acknowledged this and is working on a plan to limit the buyer’s exposure. Still in the formulative stages, the plan would save consumers as much as $1000 in closing costs.
Typically, the closing costs include out-of-pocket expenses like credit report fees, appraisal fees, document preparation fees, title fees, recording fees and underwriting fees. The good faith estimate may not be exact figures but at least it provides a breakdown of the closing costs.
To stabilize the closing costs and to help negotiate better fees there are four recommended practices.
· If you have credit relationship with a lender, talk to that lender. If your credit history with that lender is strong, you may qualify for reduced rates. Additionally, the relationship may pave the way to a streamlines process that is bound to save you money.
· Title insurance rates are not set by the lender. But, the lender can help. Don’t be afraid to ask for their help in reducing this expense. You may save as much as 50%.
· Before going to an outside lender, talk to your existing lender first. If they are happy with your business, they may give you the best terms.
· Negotiate, negotiate. There is plenty of money on the table. Don’t be afraid to negotiate with the lender.
