Navigating Mortgage Costs
Many home buyers and sellers assume that closing costs are a set part of your total home purchase or sale price, and don’t give these fees (which can sometimes be thousands of dollars) much of a second thought. Whether you are looking to buy or sell a home, you want to make sure that you maximize your financial experience – either saving or keeping the most money possible. You are shopping around for the best mortgage rates and terms right? As part of that why not also shop around for the lowest closing costs?
Are closing costs negotiable?
For the most part: yes! There is no specific state or federal law which sets the total amount you’ll pay for closing costs. What is required by law? Mortgage lenders are required by law to provide you with a “Loan Estimate” within three business days of receive your mortgage application and mortgage lenders are required by law to disclose the fees you’ll pay on your mortgage. Loan Estimates detail out the terms of the loan (including interest rate and your estimated monthly payment) as well as closing costs. Closing costs are generally broken down into several different categories including lender charges, third-party vendor fees and title and escrow charges.
Lender charges can be found in Section A of your Loan Estimate and include items like processing fees, underwriting fees, origination fees, etc. These fees may be itemized out or they may be listed as a lump sum charge. You may negotiate either a single itemized fees or the total of the lender charges.
Third-party vendor fees can be found in Sections B and C of your Loan Estimate and include items like the cost of your home appraisal, the cost of your home inspection, escrow services, fees from the title insurer and more. Many of these fees are negotiable, while some are non-negotiable (see below).
Are there any closing costs which are non-negotiable?
Yes. A portion of your closing costs are made up of fees which are non-negotiable. These include flood certifications and the cost to the lender of running your credit score and report. The good news however, is that by law mortgage lenders can only charge you the actual costs of these services to the lender – they are not allowed to mark up these fees and pass any padded costs along to you, the consumer.