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5 Mortgage Closing Costs You Can Negotiate Lower

1/31/2011

Closing costs represent a significant expense for all home buyers, though the amount you’ll pay to take out your mortgage is nothing compared against the cost of the home itself over the years.  Still, you’ll need to have a lot of cash on hand before and during your home purchase to cover these expenses.  You can reduce this coast by negotiating with your lender.

When the market is slow, lenders are often willing to adjust prices downward to gain customers.  If you don’t at least try to negotiate with your lender, you’ll never know if you could have saved some money.  This is important if you’re a first time home buyer and you’re not familiar with the process.  The following costs can often be negotiated.

The attorney fee.  You actually don’t have to hire an attorney to review your home loan documents.  Some lenders will require it.  Others won’t.  Talk to your lender about whether this step is necessary.  If not, you could save up to a few hundred dollars.

Origination fees.  The origination fee is literally the “price of services rendered.”  This cost is simply levied by the lender as payment for originating the loan.  As with any purchase of goods or services, this fee can be negotiated.

The appraisal fee.  Appraisal fees are sometimes double charged.  Check with your lender and refer to your own records to make sure you haven’t already paid the appraisal fee before closing.

Documentation fees.  These are known in the industry as “junk fees.”  They don’t serve any purpose.  Lenders often charge them simply to inflate the cost of the loan.  Always negotiate these costs lower.  Your lender also may charge you to check your credit score.  This does cost money, but it’s also considered a junk fee in some cases.  Try to have it eliminated.

Title insurance.  Your lender will automatically select a title insurance company to work with.  You don’t have to agree to this.  You are free to shop around for a cheaper title insurance company, if you want.

Most all mortgage types come with closing costs attached, though with some specialized loans, such as the VA home loan, you can arrange to have the closing costs paid for by the seller.  Negotiate any of the above fees and make sure you aren’t paying too much in closing costs.

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