You naturally want to get the best deal possible on your mortgage and there are many opportunities to save.
- You can work on your credit to get the best possible interest rate.
- You can haggle with the seller to lower the asking price.
- You can even negotiate more money off the asking price when you get the results of the inspection.
You may not realize the full extent of the closing costs you’ll be responsible for ponying up, though. On average, you’ll pay three to six percent of your home’s purchase price in closing costs. Closing costs consist of fees and charges in excess of your home’s purchase price, and they include things like:
- attorney’s fees,
- application fees,
- homeowners insurance,
- lender’s title insurance,
- origination fees,
- pest inspections,
- and more.
While some of these fees are non-negotiable, some of them aren’t. You have the opportunity to save on your mortgage fees and closing costs by shopping around for those costs that are negotiable. Here’s how to cut some costs.
Get Estimates from Multiple Lenders
One of the easiest things you can do to save on mortgage fees and closing costs is to get loan estimates from several different lenders. Whether you’re talking to mortgage brokers in Charlottesville, VA, or Seattle, WA, always get estimates from at least three lenders, if not more. A loan estimate doesn’t require a commitment, and they’re often free, or come with a small fee. The lender will need your Social Security number and income, as well as the address of the home you want to buy, an estimate of its value, and your loan amount.
The loan estimate will include details of the loan terms you can expect, including your loan amount, interest rate, and your estimated closing costs and cash to close. Lenders can vary widely on how much they’ll charge for closing costs, and that’s why it’s important to get several estimates.
Negotiate Where You Can
Closing costs typically include a number of expenses that you can negotiate or shop around for. For example:
- you can shop around for home inspectors and pest inspectors, homeowners insurance, title insurance, surveys, and a buyer’s attorney. Ask your real estate agent or friends for recommendations, or search online. You could save thousands by shopping for the best deal on inspections , attorneys’ services, and title insurance. Your mortgage broker should be up front with you about which services you can shop around for.
- Another area where you can cut closing costs is in the origination fee. After the interest rate, this is where banks make most of their money on your mortgage. The origination fee covers the costs of filing your application. Some lenders don’t even charge them anymore, now that submission of mortgage applications is largely automated. Check your loan estimates for anything that says application fee, origination fee, processing fee, or underwriting fee. Question these fees – if you have your heart set on a specific lender, you may be able to talk them down. Otherwise, choose the lender with the lowest origination fees.
Don’t Assume You Can’t Negotiate a Fee
You won’t be able to negotiate all of your closing costs. However, that doesn’t mean you can’t try. You may be surprised at how easy it is to talk your lender into lowering or waiving fees that may appear to be set in stone. For example:
- the cost to have a notary attend the closing is usually considered one of the non-negotiable ones, but that’s not necessarily true. It can cost up to $1,000 to have a notary attend closing, but you can considerably reduce those costs by using an electronic notary service to have a notary join the proceedings via video conference. Bring this up to your loan officer, real estate attorney, real estate agent, or title agent.
- You may also be able to save money on the appraisal of your new home. Appraisal fees are usually tied to the selling price of the property, but you may be able to find a less costly appraisal provider. Bring your appraisal quote to your lender and see if they can use it to negotiate a lower rate from their own appraiser – or if they’ll let you just use your own.
Mortgages come with a bunch of fees above and beyond the sale price of the home. Many of these fees are for things like attorneys, title insurance, appraisals, and other processes that need to happen to get to close. You should definitely spend the time to negotiate on some of these fees and shop around where you can. You could save thousands.