Home Closing Costs

Savings tips on home closing costs.

You can save money in several different ways on your home closing costs when getting a new morgage loan or refinancing your current mortage loan.

First, shop around for mortgage rates. Check at least 3 different banks or home mortgage companies to compare rates. An 1/8 of a point shaved off your interest rate may not sound like much but over 30 years it really ads up. Online home mortgage quotes are excellent for comparing rates.

Don't be afraid to ask the mortgage loan officer if that is the best rate he or she can give you. Often you will find that they can, and will, reduce the rate an 1/8 to 1/4 of a point.

Some buyers view closing costs as the amount of money they will have to bring to the closing. When in fact that amount of money is made up of 'closing costs' and 'pre-paid items'.

Mortgage closing costs consists of charges like the closing attorney's fee, underwriting fees, processing fees, document preparation fees, origination fee, etc.

Pre-paid items cost is made up of the cost of the first year's insurance on the home, the buyer's pro-rated portion of the current years taxes and the interest due on the loan for the number of days between the day the loan closes until the end of the month. Also included under pre-paid item costs is the escrows required by the lender to get your escrow account started. Typically the items escrowed by the lender are your next years insurance and taxes.

The annual cost of your insurance and taxes on the home will be divided by 12 and this amount will be added to the house payment that you make each month. This money is placed in an escrow account by the lender to be used for paying your taxes and insurance when they come due the next year.

The lender will typically collect at closing 2 to 3 months of the amount of the monthly insurance escrow as a reserve in your escrow account and they the amount of months collected for taxes will depend on the month in which you are closing and the month in which taxes are due in your state.

These up front escrows are also considered part of your 'pre-paid' items due at closing.

So when one sees a sign that says '0 Closing Costs' understand that this may not necessarily mean that the buyer will not still be responsible for paying their pre-paid expenses at closing. So, be sure and clarify that with the real estate agent or seller before signing a contract on the home.

Save Money on Your Mortgage Loan

Some of these fees are fixed by the person performing the service and your mortgage agent can't really do a lot about them. However, there are a few charges that you should be able to save some money on if you just ask.

The mortgage agent may be willing to give you a break on the origination fee if you ask. A typical charge is 1% of the mortgage loan amount. If you are being charged more than that then you need to question the charge. You might also request that the origination fee be a flat amount which is somewhat less than the 1% amount.

Closing attorneys charge different amounts. Call the attorney's office and ask what their fees are before deciding on which attorney to use to close your loan. Often times the seller chooses the closing attorney. However, it doesn't mean that you can't ask the seller to consider another attorney. Be sure to explain to the seller that your attorney's fee is less and it will save you some money.

The third way that you can save closing costs money is in your pre-paidand escrow items. As stated earlier, pre-paid and escrow items consist of pre-paid interest, insurance, title and escrow amounts for taxes and the next year's insurance.

Shop around for insurance. There is a huge difference in insurance premiums on homes. Title companies also charge different amounts for title searches and issuance of the title insurance. Shop around in this area also.

All these tips apply when you are refinancing a mortgage loan as well.

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