Seven Smart Ways to Cut Closing Costs

A mortgage costs more than the interest. A laundry list of miscellaneous fees known as "closing costs" could immediately add 3 - 5% or more to your home's purchase price. Ouch!

Depending on what part of the country you live in, you may pay for lawyers (yours and the bank's), engineering inspections as well as those for termites, water quality, and radon, a few month's worth of up front escrow payments to cover property taxes and homeowners insurance premiums, application fees, appraisals, credit checks, title insurance, surveys, recording fees, and points.

Here are some ways to trim those costs:

1. Before applying for a loan, ask if the application fee (if any) is refundable should you be turned down. Ask for junk fees to be waived - like underwriting or commitment fees, or document processing charges. Question fees you don't understand. Some may be legitimate, like the flood certification fee (to certify which type of flood zone your property falls into).
   
   
2. Title insurance companies pay out on an infinitesimal percentage of premiums. But you'll still be required to buy it to protect your lender in case the seller wasn't the only, or the "real" owner. And it is always a good idea to get an Owner's Policy, which protects you in the same event (your premium will be much smaller). On a refinance, see if you can get a discounted "reissue rate" from the seller's title insurer. The same goes for your survey ? you may be able to get a discount on an updated survey. Make sure you save your title policy and survey in a safe place in case you refinance your loan!
   
   
3. Question escrow. While it is standard bank policy for the bank to collect money for insurance and taxes each month, then make the payments when they come due, ask the loan officer whether there is an extra cost if you "waive escrows" and pay those items yourself. If you do escrow taxes and insurance, review your yearly escrow analysis. If there's more than a small excess (a couple of months for contingencies like tax increases), ask the lender for an explanation. You can learn more about your rights with regard to escrow accounts here.
   
   
4. Skip mortgage life insurance if you have a choice. There are lots of cheaper term policies that will pay the same, or more - and won't require you to list the bank as your beneficiary. Let your heirs decide when to pay off the mortgage.
   
   
5. Be in really good hands. The last thing you want is for your house to burn down, leaving your family out in the cold. Lenders, however, are much more concerned about their collateral, which you'll be obliged to insure. The right homeowner policy, and insurer, can save you money now, and grief later, should a disaster strike. Shop around for your homeowner's insurance like any other type of insurance.
   
   
6. Give a last look. Arrange to inspect the house one last time as close to closing as possible. (An hour before would be almost perfect.) If there's a problem, be it a broken window, frozen pipes, or a missing dining room fixture, you might be able to get reimbursed by the seller at the closing.
   
   
7. Bring your original Good Faith Estimate with you to the closing table. While some items, such as prepaid taxes and insurance or loan payoff amounts will be different than the original estimate, you shouldn't see a lot of new fees unless you have already been informed and agree to them.