What are Unnecessary Closing Costs?
What are Unnecessary Closing Costs?
What are Unnecessary Closing Costs?
Every first time home buyer should be aware that there are closing costs on their mortgage. But even more so you should be watchful of unnecessary closing costs or what are sometimes termed as mortgage junk fees.
These unnecessary closing costs are fees hidden in the mortgage documents that go to the loan originator or lender. Sometimes these fees are labeled settlement fees, underwriting fees, funding fees, translation fees, and messenger fees. These are also referred to as junk fees, padding fees or garbage fees.
The reasoning behind these fees is that the borrower is committed and will not walk away from the table. The savvy borrower will watch or question such fees. I am writing this article to help you be a prepared borrower.
Most of your closing costs are real. It is the items listed on the extra lines you need to watch out for. At one time those extra fees were listed as one lump sum saying "total lenders fees $$$". But this is no longer allowed with the new 2010 Good Faith Estimate. Now these additional fees have to be broken out. So you need to pay attention to these additional fees. Sometimes you will see them listed as "miscellaneous fees". Ask what those fees are. Other items you may want to questions is packaging fees, marketing fees, or some messenger fees. Ask what they are for and if you can see the bill for them.
Keep in mind that the time to question those fees you are wondering about is before the actual closing. So ask to see your final statement or HUD-1 a day ahead of time. It will be more difficult to negotiate or have these fees waived at the closing.
Pay attention to fees that sound like fees that are already listed. Like for example a loan set up fee. Because it sounds like a legitimate fee. Where the processing fee should actually cover the loan set up. So be watchful of this and question any fee that may appear to be unnecessary.
Another fee that can become an unnecessary closing cost is the application fee. How is this? Some companies may offer to refund it at closing and then in the heat of the closing forget to put the credit on your final statement. Hoping you are so excited to close on your new house that you will not notice.
Wire transfer or courier fees are the type of fees you can asked to be waived or reduced. Perhaps these documents can be sent electronically providing a savings to you.
Other fees you may want to verify. Like survey fees, pest inspection, or home inspection fees. They may be legitimate but may be marked up for a little extra money for the lender. So be sure that these fees are what you agreed to.
Unnecessary closing costs can also appear among fees from the title or escrow company that is closing your loan. You will find fees like a closing fee, an abstract or title search fee, or a title examination fee. Check with your closing agent to see if these fees can be reduced. Perhaps there was a recent search on the property and your fees can be reduced.
There are cases of real estate agents and title companies that always work together. This is an area where fees might be higher. You may wish to shop prices to make sure the title company is giving you their best price.
Even if you see everything is priced well, you at least show them you are thinking and paying attention to what is happening.
Your fees are usually lumped into three areas:
Lender Fees
Third Party Fees
Money Paid on Your Behalf
Lender Charges
You want to watch for those fees that are duplicate to other fees or are considered miscellaneous fees. These fees to watch are those listed in the 800 section. Particularly watch those fees that are added on the black lines at the end. Sometimes that is where some unnecessary closing costs are slipped in. Many of the fees are legitimate, but just watch them.
Third Party Charges
These are fees paid for inspections, appraisals, title searches, etc. They usually bill the lender and are put on the closing papers. Just watch that these are not marked up and that you are getting the best price for the service.
Money Paid on Your Behalf
These fees will be taxes and insurance. The taxes are fixed, you cannot negotiate those. But the insurance is something you can shop to be sure you have the best price. Your lender may recommend somebody. Just be sure you compare their price with what is out there. I have seen where some where charged $1,000 a year for their insurance when actually they should have only paid $500 when they shopped.
Thank goodness for the new 2010 Good Faith Estimate. It has removed a lot of fluff in these hidden unnecessary closing costs. But it is still a good idea to be watchful. Somebody always finds a way to get around things.
How to Tighten Stretched Skin – Many Different Notions, One Solution Using a Pancake Griddle to Make Perfect Pancakes Movie Locations Help Boost Local Economies The Evolution Of Espresso Top Moisturizers From Anna Sui Skincare Exactly Why Visiting A Tailor Is The Thing To Do For Larger Guys Car Amplifier 2 Channel How Long Does An Arrest Warrant Last? How to fix window sills Cc Holdings: Advisory Lessons Are Very Precious The Right Tools For The Job Why Use Wood? Real Wood Flooring