When shopping around for a mortgage, it's important that you do not just look at interest rates but also at what they will charge for closing costs. Closing costs can come up to anywhere between 4-8% of the cost of a house, and it's something that may sometimes creep up on unsuspecting home buyers. Some people just do not expect closing costs to be that big, and some people just have not saved enough enough to make for a comfortable room for unforseen expenses. Here are useful things to keep in mind when dealing with the closing costs that come with buying a house:
1. Ask about the fees. – Early in 2010, lenders are required to start using a standardized GFE (Good Faith Estimate) form to show the items included in the costs. This helps the home buyers because the list should show exactly which fees are included in the costs. It helps in the way of transparency. However, there are still fees that may adjust and those that are fixed. The adjustable fees are divided into two; those that have a cap on how much they can increase, and those that do not have a cap. So you see there are still some items that are quite unpredictable. When you get the GFE list from a lender, make sure that you point out each item in the list that you're not particularly familiar with and ask if there's any way the fees can be negotiated.
Most of the adjustable fees are adjustable because they originate from third parties, such as title insurance fees. What you can do is to look for your own provider of title insurance so that you can keep the cost in control and so that you can take the chance to find a better deal. Most lenders, when asked, will offer discounts for or help you find an arrangement where you can easily pay for the closing costs.
2. Can you skip paying for these costs? – There are lenders that package their mortgage by saying you will not pay closing costs. You have to understand that these costs have to be paid one way or another. The lender may just choose to integrate this into the monthly mortgage you will pay. This means that the principal amount you'll pay will be raised, and so will the interest rate. You'll end up paying more than if you just paid the closing costs up front. Of course there are financial situations that will benefit from this arrangement, but if you can pay for the closing costs and are just looking for ways to minimize it, it may not be the best route to go.
3. Check for "packaged closing costs". – Some lenders will offer to set the closing costs as a package which means that you'll pay a flat rate for the entire cost. This is good as long as you take into account all the items within the packaged closing costs to make sure it covers everything, and to see if you can get other packages which may be better.
4. Compare lenders' fees between lenders. – When shopping around for a mortgage, it's best to figure out which fees originate from lenders. Compare lenders 'fees with those of other lenders'. This way, you can have a clear way of determining which lender is offering better rates. As for third party fees, you can ask your real estate agent if he / she can recommend other third party service providers to give you a better rate.