August
2010
Tip of the Week: Ignoring Closing Costs!
by Evan, Boston 
Its a buyers time right now and plenty of people are trying to take advantage of the super low mortgage rates to save some money. The only problem are the closing costs! They can add a fortune on to your expenses and all of a sudden you’re hardly saving anything at all. Fees can be added in the blink of an eye by certain lenders and their vendors. Right now the US Department of Housing and Urban Development (HUD) is working on creating regulations that will simplify the mortgage process and save consumers as much as $1,000 off a typical mortgage transaction – theres no promising when this will come into in affect so for now just follow a couple of these rules that CNN.com has provided for all of you borrowers out there.
Get Friendly with your Current Lender
If you’re looking into refinancing, the first call you should make is to your existing lender, who already has critical information about you and your house on file. With an existing relationship with a lender it opens doors to a potential “streamlined” process which will save you a lot of extra paperwork and money on everything from application fees to appraisal fees. For people who have recently refinanced their home or have taken out a loan, you can save as much as 50% on title insurance by asking for a reissue rate, which your lender will request for you.
Get Nitpicky About Fees…
There are about a dozen different kinds of fees that could show up on your final closing statement, including credit report fees, appraisal fees, document preparation fees, title fees, recording fees and underwriting fees. For example, fees on a $200,000 mortgage could add up anywhere from $1,000 – $3,000 and that is WITHOUT any “discount” points that you pay up front to get the best interest rate. Good credit borrowers should challenge any fees that seem excessive, especially when lenders don’t always control many fees that show up on your statement. Your closing costs could jump a lot from the original good faith estimate you’re given, so keep an eye on everything and keep all fees open for discussion if you’re having second thoughts.
…at the same time, do not forget to keep the big picture in view
First priority should be to get the lowest mortgage rate possible and its important not to lose sight of that. The difference between paying a 6% and a 5.5% on a new loan adds up to nearly $23,000 in interest on a $200,000 30-year mortgage. If you have to pay a few hundred dollars in closing costs to get that rate it is definitely worth it! In fact, sometimes if you’re short on cash you might even want to consider rolling the closing costs into your loan, if that is an option. You’ll want to consider how much more you’ll pay each month as well as in interest over the life of a loan. If you roll $2,000 in finance costs into a loan with a 5.5% rate, for example, you’ll pay an extra $11 a month and about $2,000 extra in total interest. In this case you’re still better off than if you had no refinanced at all.
Related Articles:
Sponsored By:
- No sponsors for this posts.
Discussion 
Leave a Comment
Speak Your Mind
Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!
