To avoid unnecessary closing costs you have to become a savvy home buyer. In order to do this you need to understand your Good Faith Estimate. Many of the fees on this document may be similar to other ones listed. For example, courier fees and overnight delivery fees may actually be the same fee, so question any fees that look similar.
Another way to avoid unnecessary closing costs is to see the actual bill for those items listed. Especially those fees that are third party fees. Perhaps you ask to see the bill for the appraisal, this is a legitimate fee but you are looking to see if the lender has marked up how much it cost for this bill. This is a way for lenders to increase their revenue. So if a third party fee looks unusually high, ask to see the bill to be sure it has not been padded.
It is also a good idea to have your original Good Faith Estimate handy to compare with the HUD-1 closing statement. Be sure to see this HUD-1 closing statement at least one day before closing to make this comparison. You want to have enough time to question any closing costs you may feel is unnecessary.
If you see any fees on the HUD-1 closing statement that are different from the Good Faith Estimate, question them. But remember the Good Faith Estimate is only an estimate. There are some legitimate fees that may come in higher than the original estimate. But at least all the parties involved know you are paying attention.
Keep in mind that some fees can be negotiated. So negotiate, negotiate, negotiate those fees like the mortgage broker fee that can be lowered.
Watch anything listed as miscellaneous fees, you should know what those fees are. This is an area that some hidden fees can be slipped in. Be sure to have any miscellaneous fees explained.
Here is a list of things you can do to be an alert home buyer and avoid unnecessary closing costs:
- Check several different lenders and compare their good faith estimates. Ask them how firm are their estimates and which ones could possibly go up. Some lenders can come in with low estimates and then at the closing go up so be aggressive in your questions.
- Check around for the best priced title company or attorney. Make them put their price in writing so you can challenge the price if it changes at closing.
- Check to see what the cap is on the mortgage broker fees in your state are. This way you know the maximum which gives you negotiation power.
- Check with the seller to see how old is their title insurance policy. If it is less than 10 years, ask for a copy. Then inquire about getting a reissue rate from your agent. Some policies can be reissued at a lower rate. Thus you save and avoid an unnecessary closing costs.
Do not be surprised if changes you request delay the closing and do not feel it is too late. It is true delaying the closing may require new loan documents to be drawn. But the savings may be worth the delay.
All in all you can avoid unnecessary closing costs by being an alert buyer and asking for an explanation for anything that appears to be a duplicate fee or anything that appears to be different from your original Good Faith Estimate.
