Tuesday, September 1, 2015 / by Bill Berning*
As a homebuyer, you expect to pay a significant amount on the closing fees for your new home. The costs may be somewhat negotiable, depending on where you live.
Closing costs on a home can be significant. In many cases, buyers don’t realize exactly how much they will be paying until the process is underway. If there is a serious problem, the costs may rise and may far exceed what you had originally anticipated paying. Getting the right advice can help you to negotiate closing costs for your home so that you get a better deal.
Closing costs are the charges that are needed in order to process and close your home loan. When you apply for a home loan, the lender must disclose the exactly what is included in the breakdown of the closing costs. The closing costs may change based on the type of mortgage that you have.
Other factors, such as the rates for insurance, property taxes and lender fees can also have an impact on the final closing costs that you will pay. If you want to lower your closing costs, it is important for you to shop around for the best deals on insurance. You may also be eligible for certain deals, if you plan build a new home instead of buying an existing one.
Discuss the closing costs with your lender so that you have a thorough understanding of the costs that you will pay before the sales agreement is finalized. While you might not have an exact breakdown of the final costs until the day of the closing ceremony, you will still have a general idea of what you can expect to pay.
As a part of the closing costs, the lender may opt to include attorney’s fees. Attorney’s fees are typically charged on if the lender gets a third-party attorney involved in the closing process. In many cases, it is possible to negotiate these fees and the lender may also opt not to include them at all in the final costs.
Depending on the lender, you may be required to pay the year’s costs for mortgage insurance. Other lenders may want even more and will calculate a figure that translates to a greater portion of the total mortgage loan. Check with your lender to find out exactly what is required in regard to the amount of mortgage premium you will have to pay upfront.
Depending on the area that you live in, the options for negotiation can be limited but you can always save on homeowner’s insurance. Homeowner’s insurance is essential because without it you will not be able to close on a mortgage on the home. By shopping around with several brokers to obtain quotes for homeowner’s insurance, you can obtain the coverage that you need for a price that meets your budget.
Title insurance is another important cost that you will have to cover. While it is not mandatory, it can save you a lot of money if something goes wrong. Title insurance is designed to protect you against the legal costs required to resolve problems regarding the title of the home. It can also protect you against title fraud, existing liens against the property's title, undischarged mortgages and other issues that have resulted due to the failures of the property's previous owners to resolve such issues.
“Without title insurance, Mr. Buyer must either deal directly with the real Mrs. Seller or hire attorneys at his own expense to try to track down Mr. Seller and the sales proceeds. This is an arduous and expensive undertaking. Protracted negotiations and/or litigation likely would ensue. All the while, Mr. Buyer’s quiet enjoyment of his new home is in jeopardy.” says Harvey S. Jacobs, a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville, Maryland.
Saving on Closing Costs for New Construction
If you are building a new home instead of buying an existing one, you may be eligible for credits that can allow you to reduce the final closing costs on the home. “To be sure you are getting the best value on closing costs, check with a local title company, and ask if it will run a comparison for you between your builder’s closing cost estimate and the title company’s breakdown of fees.” says Sandy Gadow of The Washington Post. “Many companies will do this for you at no charge, and it generally takes only minutes.” Gadow also mentions that if the builder's estimates for the title and escrow fees offer a better deal, then you should select this option instead.
You may also be required to put a certain amount of funds into an escrow account to cover the property taxes that are associated with buying the home. The lender will then make the payments on your behalf. This upfront deposit guarantees that there is enough money available to make sure that the bills are covered.
These are just some of the fees that may be included in the final breakdown of your closing costs. You may also be required to pay additional fees based on the regulations of the local government in your area. You can discuss the fees with your lender to find out what fees are most likely to be included.
Closing cost negotiations should always be done before you sign the sales agreement. You should always make sure that you look for better deals when it comes to lowering your closing costs because there is always some room for negotiation. When you go to the closing ceremony, you should make sure that you have the payment ready to submit. The closing ceremony may take place at a title company, bank or attorney's office. Be aware that the final closing costs may be different from the estimate that was given because of the negotiations process.