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Cutting
Down On Your Closing Costs
You’re
closing on your new house and you sit down at the big conference table
for settlement. As you get ready to sign your closing paperwork, you
discover the closing costs add up to a lot more than you thought. Are
the fees right, you wonder? Do they match the good-faith estimate of
settlement fees your lender provided? And do you have to pay all of
these fees?
Unfortunately,
it may be a little late at this stage. However, if you do your homework
ahead of time—and ask your lender
questions—you may be able to avoid
or reduce certain fees and charges at settlement. Here are a few simple
ways to cut down on your closing costs:
Close
at the end of the month. Since
all mortgages are due on the first of the month, you will have to pay
interest from the day of your closing until the end of the month. This
is called pre-paid interest. By closing as close to the end of the month
as possible, you can reduce the amount of pre-paid interest due. Keep in
mind, however, that other home-buyers may be trying the same strategy
and scheduling your closing at the end of the month may be difficult.
Determine
the type of appraisal you will need.
Depending on the type of loan and your down payment, you may not
need a full-blown appraisal on your home. Make sure you check with your
lender to see what kind of appraisal you’ll need for the type of loan
you’re getting. Also, if you’re refinancing and your last appraisal
was less than 12 months ago, have your lender ask for a recertification
of value from the last appraisal.
You
may be eligible for a
discount.
Many title companies also own their own escrow or closing
companies and you may get a discount by using them. Although many of
these settlement discounts often apply only to new home loans, it never
hurts to ask whether you’re eligible or not.
Apply
for a home-equity line of credit at the same time.
If you plan on taking out a home-equity line of credit at some
point in the future, you may want to consider taking out line of credit
at the same time as your home loan. If you apply for both at the same
time you can avoid paying the additional fees you would have to pay when
you file a separate application later.
Roll
the closing costs into the home loan.
If you are refinancing, you might consider rolling your closing
costs into your loan. Although you will be paying interest on the
closing costs, this option may be right for you if you don’t have a
lot of cash at the time of settlement or simply don’t want to pay a
lot at once.
The
key to cutting costs is to do a little research ahead of time. You
should always ask for a HUD-1 form that details your final settlement
fees. Lenders are required to provide this to you 24 hours before
closing. The HUD-1 form should somewhat match the good-faith estimate
your lender provided. And, as always, if you’re unsure about a fee,
don’t be afraid to ask questions. Otherwise, you may end up paying for
more than you planned. ∆ |
