How to Negotiate Closing Costs

Getting a home loan involves closing costs. There really is no other way around it. Buying and financing real estate means various entities get involved at the behest of the mortgage company in order to keep the loan in mortgage guideline compliance as well as provide necessary documentation and information the mortgage company needs in order to make a decision about a home loan. Some of these fees however can be negotiable while others not so much so.

Closing costs are divided into two basic categories- lender fees and non-lender fees. Lender fees are those that the lender charges the borrower for directly. A lender might require an underwriting fee. An underwriter is the individual at the mortgage company who reviews the submitted loan file and determines whether or not the loan meets the required guidelines for an approval. A lender might also charge a processing fee which covers the overhead of preparing the loan for submission to the underwriter. The lender will collect money for a property appraisal as well as for a credit report.

At the request of a potential borrower, the lender can provide a Cost Estimate which will list these lender fees as well as estimates for non-lender charges. Can you negotiate these lender fees? In a way, yes. However, lenders can’t waive a particular fee for one borrower and not for another. If a lender waives a $400 processing fee for one but not for someone else, that practice falls out of compliance. However, lenders can adjust the interest rate on a particular loan and provide a closing cost credit that can be applied to the borrower’s closing costs. Your loan officer can run these numbers for you.

There are however non-lender fees that you might be able to negotiate directly with the service provider. These services are listed on your Cost Estimate and you have the ability to contact these service providers directly for a quote and ask for a discount. You’ll need contact information for various companies and it may take a little legwork but it is your money after all and why not save where you can? There’s no reason not to try and reduce your closing fees where possible. 

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