Closing in on a Basement Bargain

What You Can and Can’t Negotiate in Closing Costs

By Kara Stefan

kara_stefanWomen earn an average of 75% of men’s pay. Studies have found that women pay an average of $200 more than men for new cars. And now a recent survey of customers reveals that female home loan borrowers paid average closing costs of $1,114 compared to men, who paid $1,053 in fees.

It seems apparent to me that women aren’t being discriminated against; it’s just that we don’t fare as well in situations that require financial negotiations–like a job, car, or house. We’re great at finding bargains, but we need to work on our closing skills.

The key is to not get so caught up in the excitement of buying a new home that you lose all sense of reasoning. Once you agree on a price, the deal isn’t done. It’s actually just begun.

The following is a primer to help you recognize all the fees–hidden or otherwise–when it comes to closing costs on a new home. Plus, read on to learn what you can reasonably expect to pay, what can be negotiated, and what you should flat out refuse to pay.

Closing Costs Primer

  • Lender’s Title Insurance: This is a non-negotiable fee usually determined by the state.
  • Escrow/Attorney Fee: You’ll need an attorney, but you can shop around for one who charges a low fee. Most fees fall in the same range, around $300-$400 for a basic closing.
  • Attorney Travel Fee: Look out for this one. Sometimes when you receive your final bill, you’ll have a travel fee listed in addition to the escrow fee, up to $250 or more. Unless you’re flying an attorney to Outer Mongolia, you really shouldn’t have to cover an attorney’s travel costs.
  • Appraisal Fee: This fee depends on the value of the home, but the range hovers around $300-$400. It wouldn’t hurt to make a few calls to insure the fee you’ve been quoted is within the range.
  • Broker’s Origination Fee: This is the commission or “processing fee” you’ll pay if you use a mortgage broker. If you use a broker, he may be able to find you a loan for a better interest rate than if you shop around on your own. So it’s usually a wash–you’re basically paying for the convenience of having someone else do all the legwork, and that’s often worthwhile. These fees start at a few hundred dollars and go up to 1% of the loan, and some brokers require the fee up front.
  • Lender’s Fee: For direct bank mortgage loans, this is a negotiable fee that covers the administrative costs of processing your loan. Some lenders pad this fee to make a profit but may be willing to cut back on it, especially if you agree to pay point(s). Also, the larger the loan, the more willing they’ll be to bargain with you.
  • Credit Report: Typically, credit reports only cost $8, but the report required by a mortgage company includes much more detail and thus costs more–usually about $50. You should not pay any more unless the fee includes other services as well.
  • Statement Fee: This fee is the biggest rip off; it’s the one your old lender may charge for providing payoff information on your old mortgage to your new lender. It may run around $60, and you should definitely fight it tooth and nail.
  • Notary & Recording Fees: This may be negotiated or even waived completely if the escrow officer takes a shine to you.
  • Overhead Fees: These fees entail such things as processing, underwriting, wire transfer, or funding fees and should be absorbed by your lender as part of the price of doing business. You should therefore try to reduce or even completely negotiate these away.
  • Loan Origination Fee, or Points: This is a one-time fee you may need or want to pay out to bring down the interest rate on your loan. It’s usually between 0.5%-2%, depending on the mortgage amount. As a rule of thumb, the percentage should decrease for larger loan amounts. If you plan on staying in your new home for many years, it may be a good idea to pay points up front so your monthly mortgage will be lower.

Since women seem to permeate the real estate industry, there’s a good chance you’ll be working with a woman Realtor. Generally speaking, women reactors tend to be very willing to recommend mortgage brokers that they frequently work with and trust, and they’ll often walk you through the mortgage application process.

My female Realtor did all this and more. She recommended that I work with her ex-husband as my mortgage broker, and she never hesitated to pick up the phone and berate him if she thought he was charging me a fee that was out of line. She was wonderful–only wish she could’ve been there when I bought my car.