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The Pain of Closing Costs
Monday, July 21, 2008
Closing costs can be one of the trickiest things new home buyers
face when purchasing a property. It is the hidden costs and surprise jack-in-the-box that pops up just as your hopes that the purchase is finally complete and have been set in place. Closing costs are the reason that many people turn to alternative methods for selling or buying a home, such as with For Sale By Owner
or just listing it on a free advertising space online like Craigslist.
While it might seem silly to let your home sale be dependent upon a website like Craigslist, it can be a successful, and more affordable way to sell or buy your home by avoiding closing costs.
Closing costs are the fees that the seller and buyer pay during the closing process, including the costs that the seller will pay to both their realtor and the realtor that you use to find their home. The savvy home seller will factor these closing costs into the final price for their property, making the price increase. If you can find a home that is being offered through an alternative method of sale like For Sale By Owner
, you can forego these closing costs and save thousands of dollars in realtor fees. Of course, on the other hand, you will not have the expertise and assistance of the realtor throughout your home buying or home selling experience.
In addition to the realtor closing costs, the fees that are put into a mortgage at the last hour can also add up. For this reason, the final cost of a new home might be significantly larger on closing day than the home buyer expected. The U.S. Department of Housing and Urban Development has been monitoring ways to regulate how lenders can put these additional fees into the mortgage as a way to safeguard future homebuyers from these unexpected increases. Since all of the little pieces add up, regulating the final closing costs can become yet another way the real estate and lending market will stabilize after all of the recent slumps and uncertainty.
If you are looking to refinance your home, you should call your existing lender first. By calling the lender with whom you already have an existing relationship, you will be able to streamline the process since they already have all of your information, saving a lot of paperwork and additional fees. You can save as much as 50% on title insurance if you ask for a reissue rate from your lender as well.
If you are buying a new home, try petitioning your existing home lender. They will be anxious to keep your business and assuming you have a good working relationship, you might get a better-than-market offer from them.
Pay attention to the fees associated with your final closing costs. There will be more than a dozen fees associated with your closing statement, including the application fee, appraisal fee, document preparation fee, recording, underwriting and more. Lenders are required to give a good-faith estimate on the closing costs within three days of the loan application. Look over these numbers to see what you can negotiate ahead of time to say money.