When you are planning to take out a mortgage loan, you must give due attention to the get the loan at a low rate. But apart from the usual rate of interest, another thing that you must look into very seriously is the closing costs involved in the loan. It is to be noted that some lenders keep the interest rate at very low levels and compensate for that low rate by imposing steep closing costs. Due to high closing costs, sometimes you actually end up paying more over the long run. Closing costs in various forms such as loan origination fees, application processing fees, discount points etc, are tacked on to the mortgage loan and the closing costs can actually range from few to thousands dollars. Here are some tips to save money on closing costs.
Check out several loan offers
If you have decided to take out a mortgage loan, you need to have a careful look on different loan offers of various lenders. You need to check out the interest rate as well as the closing costs involved in these loans. You must take quotes from at least 3 to 4 lenders and make a comparative analysis on these quotes. The lenders from whom you take the quotes will provide you the good faith estimate (GFE) which will reveal the mortgage rate of interest and the closing costs. You will see that mortgage rates and the fees vary from lender to lender. Once you are aware of the total costs associated in a mortgage loan, it will help you find out best mortgage loan for you.
Bargain on the fees
Once you come to know about all the costs associated in a mortgage loan, you can calculate the annual percentage rate (APR) of the loan. Here it is to be noted that you may feel that some fees are too high and you have all the rights to negotiate fees with the lender. Sometimes lenders can agree to reduce the fees too.
Discount points are very important
Discount points or points are way to lowering down the mortgage interest rate by making some extra payments. Each point is equivalent to 1% of the amount that you borrow and that actually lowers down the mortgage rate of interest by a certain percentage. These points are included in the closing costs and have to be charged at the time of closing. You should ask the mortgage lender to give quotes with zero discount points. This will actually help you find out how the discount points influence the overall costs of a mortgage loan.
Check out the additional fees
In addition to the direct mortgage related fees, there are some additional fees associated in a mortgage loan. These additional fees may include recording fees, appraisal fees, transfer taxes, express delivery fees etc. You must include these fees too while finding out the total fees associated in a mortgage loan.
Complete information on the closing costs and the mortgage rate will help you find out the best mortgage loan for you.