How to Save Thousands in Closing Costs
In her weekly column, “Savvy Consumer”, Elisabeth Leamy tells us how to save thousands in closing costs.
Leamy discusses some of the tactics used to inflate fees & explains the fees we should expect to pay:
- Loan Origination Fee: 1% of the purchase price is a typical fee. In a refinance situation, often times the bank will wave this if you ask. Especially if there is substantial equity in the property. If your bank will not, shop around – especially if you are dealing with a national bank that has traded common sense in for the opportunity to be a huge bank.
- Loan Discount: 1% of loan amount per point. Often referred to as ‘points’, this is simply prepaid interest. Typically a bad deal, in today’s unusual market, 1 point might be mathematically smart. However in normal conditions you will be well served to avoid points. Since the average mortgage is roughly 5 years, a homeowner rarely stays in a property long enough the realize the benefits of paying the points. The bank knows that and you should too.
- Underwriting Fee: $150-$325. Again, this is a fee that should be negotiable in a refinance situation. If you have substantial equity in your home, the bank doesn’t need to spend much time investigating your loan. Its a no-brainer.
- Administrative Fee: $390-$550.
- Funding Fee/Wiring Fee: $0-$30.
- Credit Report: $15-$60. Leamy suggests requesting a receipt for this fee. Since it is outsourced, it is often times inflated. A receipt would very that you are not paying more than the lender is paying.
- Tax Service Fee/Escrow Fee: $58-$89. The bank monitors the payment of your property taxes and then they charge you for the service. Nice huh?
- Appraisal Fee: $100-$500. Again, this should be minimal for a refinance situation.
- Survey Fee: $0-$250. Again, this should be minimal for a refinance situation. Also, ask for a receipt. This is another outsourced service.
- Flood Certification Fee: $11-$25. This is legit in most situations. However if you are purchasing a second-story condo, the fee should not be charged.
- Hazard Insurance: $300-$600. If you plan to use the property as loan collateral, then the lender wants that property to be insured. Often times homeowners insurance will do the trick and you may need to give proof of insurance (or prepay a few months of coverage).
- Interest: Varies. Of course, this will vary. Leamy suggests scheduling the closing for the end of the month. This will save on some interest that might be due at the closing.
…And those are just the lender’s fees. The article also covers fees imposed by mortgage brokers, title companies, and ol’ Uncle Sam. There is alot of good information in this article. Be sure to give it a read, especially if you plan to utilize the 2009 First-Time Homebuyers credit. Cha-Ching.