Borrowers have used the Internet for years to shop for mortgages. Now a growing number are actually closing their mortgage loans online, too.
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Achieving the American dream of home ownership has never been as simple as just paying for the house itself. There are always the closing costs to pay for and factor into the equation, too.
Here’s something all mortgage loan applicants can agree on: the desire to save as much as possible during the home buying process.
With that in mind, keep in mind that the negotiations on closing fees can begin early on with the seller when you’re hammering out your purchase/sales contract.
As a way to sweeten the deal, the seller may agree to pay all or most closing costs, which is potentially saving you thousands of dollars. In recent years, sellers were much less likely to offer such an enticement, but since the advantage in most of the country has now swung back to the buyers’ side, there’s no better time to take advantage of this negotiating tact.
How the closing fees are traditionally divvied between buyer and seller varies from state to state, reports Yahoo finance. Similarly, how much is actually spent can vary from lender to lender.
The New York housing market, for example, had the highest title and settlement costs in the country. Texas was second, followed by Hawaii, Ohio and Florida. Those seeking a Missouri mortgage pay the lowest closing costs, according to the year’s study, followed by Michigan, New Hampshire, Montana, and Wyoming.
Without knowing what’s expected in your situation, we can tell you there are many fees that you can negotiate or even dispense with entirely, especially if you’re an intrepid negotiator.
For example, bargain away a document preparation fee, considered by most to be a junk fee, which be $150 to $250. with outright. Similar are the “commitment fee,” “underwriting fee” and “processing fee” - all costs supposedly tied to loan review and home purchase loan processing.
If any of these will be included in your closing-fee package, ask what specific services they cover, and be particularly wary if more than one is assessed.
Incidentally, the federal government requires mortgage lenders to provide buyers with reasonable “good faith” closing-cost estimate well before closing date, but that doesn’t mean a few others won’t be tacked on at the end.
As you can see, there’s a lot at stake. Buyer closing costs can range from 2 percent to as high as 7 percent of a home’s sale price, or $4,000 to $14,000 on the purchase of a $200,000 home.
In a buyer’s market, home mortgage applicants have the luxury of unique perks and savings. Builders and sellers sweeten deals through a variety of incentives.
But which are most appealing to consumers?
Based on a recent poll, it’s not even close: fully paid closing costs.
“Not surprising, this would represent a bottom-line savings of several thousand dollars in normal closing cost fees and services,” said Michael Bearden, president and CEO of HouseHunt, Inc., a consumer-oriented Internet firm which conducted the national e-mail random survey. “In contrast, only two percent of respondents chose a paid trip or vacation as their top incentives.”
Placing a distant second in the homebuyer incentive survey (see chart) was “free upgrades,” with nine percent of the vote. In third place at six percent was “free property inspection.” Other incentives include buy-downs on various kinds of mortgages.
Even with the slowdown in overall U.S. market activity and price appreciation, existing home sales for 2006 are expected to be the third best in history at 6.47 million. The most balanced market in eight years between buyer demand, seller supply and the inventory of unsold homes - achieved in the second quarter of this year - is expected to continue for the first half of 2007.
“As a result, today’s consumer buyer can afford to be more patient and more selective in the home buying process,” Bearden said. “Successful buyer incentives are more bottom line, like free closing costs and free upgrades. Likewise, real estate agents have to be more responsive with fast, effective communication with customers.”
