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Closing costs are necessary evils of closing a mortgage. However, at times, they are used to increase the income of the mortgage originator or lender in a deceptive manner. To minimize any potential “damage”, you must learn the language and be diligent in your examination of the Good Faith Estimate (GFE) of closing costs. Statistics suggest that Americans spend over $100 billion a year in closing costs! But if you get the knowledge you need and are very careful, you might save hundreds, if not thousands of dollars in expenses to close your mortgage loan. First, learn the difference between fees, which are required in almost every state and jurisdiction, either by municipalities or mortgage lenders, in the U.S. to close mortgage loans. Items such as recording fees, title insurance, flood certifications, tax service fees, surveys, title examinations, and in many states, tax stamps, fees that must be paid when a property changes ownership. However, if your state has a fee of $40.00 for recording a new mortgage and your lender wants to charge you $100.00, don't allow it. Surveys, usually costing around $125-$175, are required for a purchase but not always required for a refinance. Try to get this fee eliminated when you are refinancing. And, should your lender try to charge you more than the above-noted fee, ask them to justify the charge.
Second, become familiar with the “lingo” and background of any “junk fees” the lender wishes to charge. These extra fees are called “junk” because they do nothing for you and merely increase the income of the lender. These fees have different names and you will no doubt see one or more on your estimate of closing costs. When you see line items with the titles, “underwriting fee”, “processing fee”, “document preparation fee”, “administrative fee”, “warehouse fee”, or “funding fee”, you can be confident these are junk fees. All of these are negotiable items which you can discuss and/or eliminate.
If you spend the time to learn the language of closing costs, carefully examine the written estimate given to you by prospective lenders, and be willing to fight for your rights, you can save hundreds of dollars of expenses in closing your mortgage loan.