Tips For Negotiating Closing Costs When Buying A New House Or Refinancing Your Current Home

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home-closing-costs-by-Ruth-L.jpg According to Ray Martin, the Early Show’s financial guru, average home closing costs are between $2,500 and $3,500.

Depending on the amount of your loan, your closing costs could be much higher.

Typically, closing costs run between 3% and 5% of your loan amount, so if you’re borrowing $100,000 you can expect closing costs of $3,000 to $5,000. If you’re borrowing $200,000 you can expect closing costs of $6,000 to $10,000. Source

As Martin points out in the above video, some closing costs are necessary and unable to be negotiated.

They include:

  • Homeowners insurance – pays for replacement or repairs should the home become damaged or is destroyed. It also pays for belongings in the home that were also destroyed. A bank will not hold a mortgage on a home that is not insured.
  • Title insurance – protects the bank and homeowner against any possible liens against the property. Title insurance is different from homeowners insurance as it focuses on possible problems with the title, while homeowners insurance covers defects in the home.
  • Appraisal fee – covers the work of a home appraiser who determines the value of your home. This is always done with a new purchase and sometimes done with a refinance.

Closing Fees That Can Be Negotiated

Other closing fees are set individually by the lender and are, therefore, open to negotiation.

They include:

  • Attorneys fees – These are paid to the mortgagor (not your personal attorney). Attorneys fees cover the costs associated with examining the title and other legal requirements of the bank.
  • Loan processing fee – This is a fee that some banks and, more commonly, brokers charge. Described as a “A fee charged by the lender for accepting a new loan application and gathering all the necessary documentation”, you can argue your way out of this miscellaneous fee.
  • Points – These are charged by many lenders as a way to manipulate the interest rate. If you have good credit, you can refuse to pay points, but you should also shop around to find a lender who will not charge points.
  • Application fees – Many loan brokers will charge non refundable application fees just to start the process of your loan. Asking for such a fee should signal that the broker is not someone you want to work with unless, you have questionable credit and will need their expertise to get a loan.
  • Document preparation fees – These are charged when the bank uses an outside company to prepare the loan closing documents.
  • Notary fee – This is paid to the individual who notarizes the loan documents. If this person is part of the bank staff, there is no reason you should have to pay it.

This is not to say that a bank should not charge you any of these closing costs. It’s just that they should not load down your application with too many of these fees.

For example, if they charge an application fee and a loan processing fee, then a document preparation fee and notary fee should be included, not tacked on.

 

home-loan-forms-by-Casey-Serin.jpg

 

 

Closing Costs That Are Optional

There are also some fees that you should consider paying that the bank may not require.

They include:

 

 

 

More About Closing Costs & Home Refinancing

29 Home Closing Costs Explained

Third-Party Fees Associated With Home Closing Costs

Closing Costs Calculator

To Refinance Or Not To Refinance?

Common Closing Costs & Fees

How To Cut Your Closing Costs

FHA Closing Costs Explained

Average Closing Fees For Home Mortgages

Ways To Save On Closing Costs

Understanding Home Refinancing Fees

Home Closing Costs 101

Costs Of A Loan Through A Mortgage Broker

A Buyer’s Home Closing Costs

How To Negotiate Which Party Pays Which Closing Fees