February 14th, 2018 8:03 AM by Jackie A. Graves, President
you get a mortgage and
are ready to complete the purchase of your next home, reviewing your closing costs can
feel like visiting a country where you don’t speak the language.
terms. Odd-sounding services. And a sizable menu of fees for things you don’t
bright spot: Many of these fees can be reduced or eliminated.
first thing you need to do is understand that some items here are movable and
negotiable,” says Bruce McClary, spokesman for the National Foundation for
mortgage origination fee is an upfront fee charged by the lender for
processing. It’s a percentage of the loan amount — often about 1 percent.
underwriting fee is charged by lenders to analyze a mortgage application, calculating the
riskiness of the loan.
this is broken out separately from origination fees, it’s something you should
be able to negotiate for
a reduction or elimination, McClary says.
already paying an origination fee,” he says. “Why are you having me pay for an
tax service fee covers the cost of hiring a company that will monitor your
property taxes to verify the amount due each year and make sure the taxes are
paid on time.
tax service company is a subcontractor for the mortgage loan servicer. The
servicer is the company that collects your monthly payments and distributes the
money to local and state tax agencies, the homeowners insurance company and to
the investors that own the loan. Your lender might be the servicer, or it might
pass along that task to another company.
some lenders, you’ll see line item fees for courier or delivery, or similar
costs for transporting documents. You might even see “overnight” or “express
fees can be relatively minor, so it may be better to challenge larger fees than
these types of itemized costs. It’s a more “efficient use of your time to try
and make the biggest cut,” McClary says.
appraisal fee covers the cost of the quick home examination to determine the
value of the home for a mortgage. “(These fees) will vary widely
across the country and even across the state,” says Andrew Pizor, staff
attorney with the National Consumer Law Center.
lender usually picks the appraiser or the appraisalmanagement company. “It should be
passed along at cost,” he says.
of the National Foundation for Credit Counseling, says that if you have
motivated sellers, you could negotiate with them to cover the cost.
insurance covers the cost of doing a title search to make sure no one else has
a claim to the property. It also pays for an insurance policy that will offer
protection if claims surface later.
are usually two policies. One covers the buyer, the other covers the lender.
may be able to trim these costs.
ask about the reissue rate,” Pizor says. The reissue rate is a homebuyer
discount on the cost of an owner’s title insurance policy.
your house has been sold relatively recently, most of the heavy lifting on a
title search already has been done and there is less risk and less to check.
The reissue rate takes that into account.
you can take advantage of a reissue rate, it can mean “a decent savings,” Pizor
states charge an escrow fee. “Escrow is the neutral party between the buyer and
the seller sometimes used in lieu of an attorney,” says Beth Peerce, a vice
president with the National Association of Realtors and a real estate broker in
is licensed by the state, and it can be a less expensive option than attorney
fees, she says. Instead, a fee is paid to the title or escrow company, for
conducting the closing.
on where you’re buying a home, the closing will be handled by an escrow agent
or an attorney, and the charge is often listed as the “settlement fee.”
fees typically run from $400 to more than $1,000, depending on location, says
Mike Dimech, senior vice president of operations for Norcom Mortgage.
confuse escrow fees with money held in escrow. The latter is money held for
payments made periodically for flood insurance, property taxes and property
Recording fees, title fees and
transfer taxes are costs that local municipalities charge when a property
changes hands. The exact terms will vary, but these costs are incurred to
record that the property now belongs to someone new.
If you’re unsure of these
costs, call your county or municipality to make sure the charges right. “There
shouldn’t be any padding here,” Pizor, of the National Consumer Law Center,
property taxes often catches buyers by surprise.
taxes are often collected by lenders in advance, she says. And while the
current owner has paid property taxes up to the closing, this cost covers the
buyer’s portion from the closing date to the end of the tax year.
Be alert for phony fees listed
under vague names for services. In this category are prep fees, quality control
fees, file storage fees and email fees.
“I saw an email fee once for
$50,” Pizor says. “That took some gall.”
The key to spotting bogus
charges is to question them. “If you don’t know the vocabulary or it’s new to
them, don’t be afraid to ask questions,” says Ron Phipps, former president of
the National Association of Realtors. “Get over that.”
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