August 26th, 2014 3:14 AM by Jackie A. Graves, President
At the end of the home-buying process, you
will be faced with closing costs, the fees due at signing required to
complete a home sale. Closing costs can be expensive, but some of
those fees may be negotiable.
Check the Market Temperature
The nature of the housing market may dictate
whether the buyer or the seller picks up various closing costs.
If it’s a buyer’s market—a bit cold and homes
aren’t selling well—sellers may be more willing to bargain and take on some closing
If it’s a seller’s market—the market is hot
and homes are selling quickly—the seller has the advantage and little incentive
to give the buyer a break.
However, you shouldn’t accept any
fishy-looking fees without asking first.
Which Closing Costs Are Negotiable?
When you apply for a loan, your lender or
mortgage broker must provide a good faith estimate (GFE) of fees due at
This is a very useful tool, but bear in mind
these are estimates—not guarantees. Compare the GFE to the final closing costs
statement and the HUD-1 settlement statement to look for big differences.
Some fees are generated by third parties and
typically don’t change very much, no matter where you find your loan. Then
there are additional expenses you can’t control, like taxes and government
Other fees may be junk fees—costs that are
put in by the lender to pad out the bill. These fees should be able to be
negotiated or waived.
Negotiable fees are generally found in the
800s section of the GFE. They may include the following:
Insurance: The lender will recommend one, but you don’t need to accept it. You can shop around, compare fees, and go with the one that suits you
best. However, you can’t have this waived.
fee: These are just there to make sure you don’t jump to another lender. Ask
to have it waived. If you can’t, negotiate that if the loan falls through due
to the lender, the fee will not be charged.
fee: Some loans have an application fee. Ask your lender if they will waive
or credit this fee towards closing costs.
fees: Ask exactly what these are for, especially if they are high.
mail fees: With almost everything being digital, your lender should provide
evidence these fees were necessary.
Discount points: These increase
your closing costs but reduce your interest rate. If you have discount points
and your closing costs are too high, you may want to eliminate them. Talk it
over with your lender and be sure to figure out the new monthly mortgage
payments if you do.
Just Ask If You Have Questions
It is your right to question anything on your
HUD-1 and GFE documents, so do ask questions if you feel a cost is too high or
doesn’t make sense.
Simply asking the lender to explain certain
fees might be enough for the lender to waive them, particularly if they were
junk fees to begin with.
Don’t Get Intimidated by Closing Costs
Even if your closing costs rise significantly
beyond your GFE, you may feel pressured to accept them to avoid losing the home
to another buyer.
Many lenders would rather close a deal
instead of going through the process again with another buyer. Use that to your
advantage and be prepared to walk away from the table.
As you review your closing costs, be your own
advocate. It’s a good idea to visit a few different lenders and compare GFEs.
Always make sure you receive a thorough
explanation for any fees that seem unusual, unnecessary or just too costly.
By: Craig Donofrio |Updated from an
earlier version by Emmet Pierce.
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