Closing Costs and Junk Fees
Like most things in life, when you purchase a home, there are a number of costs aside from the actual cost of the home that must be taken into account. These can quickly add up and it is common for a person to spend several thousand dollars in closing costs.
Closing costs are the things that one must pay before taking ownership of a home. This includes things like attorney fees, title searches, and loan origination fees. A lot of people don’t realize it, but when you purchase a home, in addition to the down payment, it is common to spend between $2000 and $4000 in closing costs.
Since closing costs can add up so quickly, it is very important to take each cost line by line and determine if it is necessary and if there is anything you can do to mitigate it. Your lender and real estate agent should be able to provide you with estimates of closing costs before the actual closing day, so that you should not wait until the day of closing to question each cost.
There are many costs, which are simply part of buying a house. For example, you will need to hire a lawyer to prepare the paperwork and a legal assistant will need to be on hand during the signing of the contract. Other costs, such as a title search or a home appraisal are also par for the course.
However, it is also common for junk fees to be included with the loan, which are often negotiable. For example, often a lawyer may include a very high charge for sending the contract by courier. This is often unnecessary or highly inflated, so it should always be questioned. The lender themselves will also often add on a number of junk fees, such as extra points or certain loan fees, so each and every charge from the lender should be questioned.
For non-junk fees, such as lawyer costs, even though they are required, it is often possible to get a better deal simply by asking or doing a little calling around. So, once you have received an estimate of the costs, ask your real estate agent if you can get it any lower and if they can not help you, do a little calling around to real estate lawyers to see if you can find a better deal. In most cases, you can use your own lawyer, so it may be possible to save several hundred dollars. However, in certain cases, such as when buying a bank owned or foreclosed property, you may not have as much freedom when it comes to choosing your lawyer.
Closing costs add up very quickly and it is common for loan originators and lawyers to include a number of junk fees, so it is important to carefully examine and question all costs before going to your closing meeting. This can often save hundreds of dollars.