Home Loan Closing Costs
Learn how you can avoid over-paying on your home loan

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You can go to quickenloans.com or lendingtree.com along with local mortgage lenders in your areato determine what loan will best suit youand your family.  You can compare closing costs, APR's and Par rates to determine what loan will best serve yourand your family's long-term interests.


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HOME LOAN CLOSING COSTS


Learn about the latest new home loan and refinance guidelines...


Key facts:



Home Loan Closing Costs are generally in the 3% range in Georgia, howeverkeep in mind that it is also based on the amount that you borrow and the particular lender that you select.


As a home purchaser you can negotiate to pay the closing costs, you can negotiate to have the seller pay the closing costs, or you can negotiate to split the closing costs.


Basically who pays the closing costs are negotiable. In the end it will be you, the purchaser who actually pays the cost.


Let’s say you offer $200,000 to purchase your home from the seller.


The seller owes $160,000 on his current loan. Closing Costs are $6,000 and the real estate commission (in which the seller pays) is $12,000 and the seller agrees to pay closing costs. The seller would net $22,000 under this scenario.



If the seller liked the offer and the net proceeds he would accept.



Keep in mind that it is the $200,000 offer price that actually paid the closing costs and the seller netted $22,000 which was the seller’s goal.


If the seller needed to net $24,000 he would possibly agree to pay 2% of the closing costs and that would net him the $24,000 that he needed.




Likewise the seller could choose to reduce the price and have the seller pay all of the closing costs, Increase the price and split the costs, or negotiate still further on the sales price or other areas of the contract until mutual agreement could be reached.




Closing Costs include a number of charges that are a result of your new loan and include the following which are the most common.



Legitimate fees are listed below:



  • Appraisal FeeOn an average metro Atlanta area house the fee is $300 to $400. For other types of property it could be higher.


  • Lender’s Title Insurance FeeThe lender will purchase lender’s title insurance to help protect against errors in title or past ownership error that may arise.


You also have to purchase a separate policy to protect your own interest.


I strongly recommend it to all home buyer’s that I representand you too, should strongly consider getting your own title policy for future protection in title disputes.


The coverage usually cannot exceed the purchase priceso if you have a title dispute years down the road after the value of your property has doubled, your maximum payoff would still be the price you purchased the property for.



Disputes in title are rare, but they can and do occur. For several hundred dollars you can buy a policy to protect yourselfand your family from potential title disputes.


  • Intangibles Tax FeeIn Georgia we have intangibles tax which is in my opinion related to the ad-valorem tax charged annually on car owner’s birthday in Georgia.


The intangibles tax on a new loan is $3 per thousand or 3/10th of 1%so a 200,000 house loan would cost you $600.


There appear to be no logical reason to have this tax or the ad-valorem vehicle tax (recently changed to a sales tax on all car saleswith similar logic).  


The ad-valorem and the sales taxappear to be a big money generator for the State of Georgiaand no one in the state legislator appear to have the political will to eliminate the sales tax or the intangibles tax at this time.


  • The sales tax that replaces the ad-valorem vehicle taxappears to be a shift from one set of taxpayers—to anotherto continue the generation of money for the State of Georgia.


  • Transfer Tax FeeTax Service Fee is a tax for transfer of ownership in Georgia.


  • State Tax or State StampsFee charged by some states in a real estate transaction


  • Recording FeeFee to publicly record documents so that the world knows you own the property or have an ownership interest in the property.


  • Attorney’s FeeIn Georgia it is usually about $500 or $600 on a typical closing. If you have an unusual closing such as a simultaneous closing expect to pay more.


  • Loan Origination FeeThis is usually the highest amount paid in most closings other than real estate commission which is usually paid by the seller.


The lender normally takes the loan application, assembles the loan package, coordinates the appraisal and closing, and they have to be paid for their services.


  • Loan Discount FeeThis fee is paid to buy the loan down. One discount point is 1% of the loan amountand it may buy the loan down about a quarter of one percent.


  • MiscellaneousSome miscellaneous fees are legitimate, however many are questionable and/or junk fees.


Legitimate fees are listed above and if they are on your closing cost document, initial fees estimate, good faith estimatetruth-in-lending statement etcthey are to be expected!  


However, the fees listed below are questionableand you should use caution to determine if you want to pay them based on your current financesand credit position:



  • Discount Fee


  • Underwriting Fee


  • Warehouse Fee


  • Creative Fees


  • Duplicate Fees


  • Up-charges



Junk fees are often utilized by lenders and/or loan officers to pad their earnings and they are listed below:



  • Administrative Fee


  • Application Fee


  • Appraisal Review Fee


  • Ancillary Fee


  • Courier Fee


  • Documentation Preparation Fee


  • Document Review Fee


  • Email Fee


  • Processing Fee


  • Title Review Fee


  • Settlement Fee


  • Survey Fee


If you are in a "strong credit position" and/or are putting a large down payment downan experienced lender should reduce or eliminate these fees because they know that you have a strong credit situation and they know that you can go elsewhere and get a loan that does not include those junk fees.


If more than four junk fees or junk fees that you don’t like are included in your closing costs you should negotiate them out, have them reduced or consider crossing the loan company off your list of potential lenders.


NOTE: If you anticipate purchasing your home in a tradional manner (from a home seller) it may be wise for you to get "pre-approved" on the front end.  By choosing among 3 or 4 lenders (don't give out your social security number or have your credit pulledat this point) and comparison shopping—you can decide which company to choose for your home loanand then get  pre-approved prior to house huntingif it is in your best interest to do so!


Be sure to get your magic marker or pen out and go line by line over the above fees on your Good Faith Estimate (scroll down to the bottom of this page to learn more about the Good Faith Estimate)  to see if you want to pay the questionable or junk fees aboveso that you can reduce the overall cost of your loan!



By being in a strong credit position you can "politely" ask the loan officer to remove the fees and if they don'tyou can move on to a lender who will not only remove the fees, but will also offer you a better package deal with a lower APRand the same or a better interest rate!



Truth-In-Lending Statement:


Required by LawIt is neither a contract nor commitment to lend but it will state the APR, the finance charge, the amount financed, and the total number of payments.



It will also state if there is a pre-payment penalty either partial or full.  If partial you may be entitled to a refund of finance charge.  If “may have a penalty” is checked that means there will be one.  The Truth-In-Lending Statement will also state if the loan is assumable or not.



On the Truth-In-Lending Disclosure Statement be alert for:



  • Proper rate calculations


  • Filing fees


  • Pre-payment penalty (hard or soft)


  • Loan balance * 0.80 * interest rate/2 = pre-payment penalty


  • Refund of finance charge


  • Loan assumption


  • Be aware that statement is an estimate only


  • No credit life, or credit disability is checked (it is normally best to purchase life insurance or disability insurance in the open markethowever, the decision as to whether you want to purchase it through your mortgage company is ultimately up to you)



Good Faith Estimate:



Required by law, this document will give you an estimate of all the costs contained in closing your loan.



It is wise to ask for your good faith estimate before you make loan application.  It does not make good financial sense to apply for a loan (and obligate yourself financially) before you know what your closing costs are.


Ask for a written guarantee that the final closing costs will not vary by more than 8%-10% of the amount stated on the Good Faith Estimate.


Also if you have a written commitment you can compare it to other lenders (you should have 3 or 4 lenders or mortgage brokers) so that you can put yourself in position to choose the loan that is best for you and your family.


Did you know that the Homeowner Protection Act of 1998 gives consumers the right to cancel Private Mortgage Insurance (Insurance that is required if you put less than 20% down)
if certain conditions are met?



Other questions to ask the loan officer:



If interest rates go down between the original good faith estimate (GFE) and the lock-in periodwho should benefit?


The client, or the loan officer, or both?



Asking intelligent questions is the best way to communicate that you are a savvy consumer and you won’t be easily taken advantage of!



Always state (and be true to it) to loan officer that you have all of your paperwork handy and will be easy to work with.


Ask for a statement (or guarantee) in writing that says that the mortgage company’s final cost will not vary by no more than 10%at  the most.


You can go to quickenloans.com or lendingtree.com along with local mortgage lenders in your area to determine what loan will best suit you and your family.  By doing a proper comparison using the guidelines mentioned above you can enhance your enjoyment of the home that you plan on purchasingor your current home if you decide to refinance.


By understanding and applying the above information on your next home loan or refinance—you put yourself and your family in control of the closing costs and you avoid having the closing costs (mortgage lender)  control you and your family!


About This Article:

 

The above article was written by Thomas (TJ) Underwood.   Thomas (TJ) Underwood is an active real estate broker in the state of Georgia and is the writer behind The Wealth Increaser, Home Buyer 411,  Home Seller 411, The 3 Step Structured Approach to Managing Your Finances, Managing & Improving Your Credit & Finances for this MILLENNIUM and CREDIT & FINANCE IMPROVEMENT MADE EASY—FREE GUIDE. 

He is the creator of TheWealthIncreaser.com where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner.  He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. 

You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page. 

You can also get other highly relevant tips on "living your life more abundantly" and possibly earn revenue at the same time by linking to TheWealthIncreaser.com.


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