Many homeowners do not understand closing costs. When shopping for a mortgage homeowners that neglect to compare closing costs overpay. Here is what you need to avoid overpaying at the closing table. Securing a mortgage for your home can be a difficult and expensive process. Closing costs are a fact of life and cannot be avoided; however, the amount you pay can vary significantly. Depending on the lender you may have the option of paying these fees at closing or financing them with your mortgage. Before making any financial decisions you might later regret, you need to understand the basics of closing costs. Mortgage lenders charge fees for every aspect of writing a mortgage. These fees vary from one lender to the next, and typically amount to as much as 5% of the loan value. The good news is closing costs are subject to negotiation. Closing costs come in two varieties. Most fees are one time expenses you will pay at the closing table. These fees include your points, lender application fees, appraisal, title search, credit report fees, and any other administrative fees your lender lumps into the closing costs. These closing costs represent non-recurring fees. Recurring costs on the other hand are charged annually. Recurring fees include the interest, taxes, and insurance you are required to pay. You may have the option of paying these expenses upfront each year, or on a monthly basis. Your lender may even require escrow to ensure the recurring costs are paid on time. To avoid unexpected surprises at closing, pay close attention to the mortgage offer and loan contract. Do not be afraid to haggle with your lender or broker on the closing costs. The market is extremely competitive; you are in the driver seat when it comes to negotiating terms for your new mortgage loan. To learn more about saving money and avoiding common mistakes, like overpaying at closing, register for a free mortgage guidebook. |
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