-->Taking out a mortgage loan to finance the purchase of a home is a big investment. In addition to the required down payment amount and the mortgage rate of interest, a mortgage loan involves several other costs. Before taking out a mortgage loan, you should be well aware of all the costs associated in a loan. Again, as per the Federal Real Estate Settlement Procedures Act, your lender should also provide you with the good faith estimate (GFE) of all the fees required at the time of closing. As per the law, your lender should provide you the GFE within 3 days of applying for the mortgage loan. Without obtaining the GFE, you should not finalize a mortgage deal.
Closing costs include all the expenses that you have to incur at the time of closing of a deal. Generally, closing costs range between 3% to 5% of the sale price of the house. Before finalizing a deal, it is wise to wait until you receive the GFE. It would be more prudent if you can obtain the GFEs from a few lenders. Then you need to compare the fees charged by each of the lenders and finally select the best deal.
GFE is an estimate
GFE gives an estimate of the closing costs. Some of these fees are controlled by the lender. Some fees are imposed by the third parties and the lender has no control over the third party fees. Generally, the third party fees don't vary much from lender to lender. Again, there is no difference in the tax rate from lender to lender. Here we discuss about the third-party fees and the fees which are controlled by the lenders, along with the non-negotiable fees -
1. Fees that are controlled by the lenders
There are some fees which are controlled by the lender and these fees are negotiable. Some of these fees are fees related to underwriting, loan processing, wire transfer, rate lock, mortgage application, origination, discount, tax-related broker, application, credit reporting etc. If some or any of these fees seem/s unreasonable to you, you should ask about it to the lender and negotiate with the lender to reduce it. Some lenders may include vague or junk fees. Make sure that you don't pay junk fees.
2. Fees charged by the third parties
There are some fees which are charged by the third parties, other than the lender. Some of these fees are the fees for title insurance, attorney, notary, document preparation, title search, title examination, appraisal etc. You don't have much room to negotiate on these fees.
3. Non-negotiable fees
There are some fees which are not at all negotiable. The transfer tax, stamp duty and recording fees are not at all negotiable. These fees are charged according to the rates prevailing in your particular state.
You have to be very skeptical about these fees. You have to bear these fees from your own pocket. If you are cautious enough, it can save you a lot of money.