Once shopping around for an affordable mortgage and suitable lender has been finalized, the more intricate negotiations begin. Within three days of receiving a borrower’s loan application, the lender issues a ‘good faith estimate’, or GFE. These documents illustrate a detailed listing of ‘estimated’ closing costs involved with the funding of the mortgage loan, which will include all fees, appraisal cost, premium for the title insurance, and a partial interest payment for the month. There are two primary categories of charges contained in the documentation – lender or broker fees, and third-party fees.
Categories of Charges
The first order of business, and the wisest advice, is to find out the details by asking for a specific explanation of each cost involved. Each cost contained within the GFE is broken down by numerical code, from 800 to 1300. Generally, the ‘negotiable’ lender fees are within the 800 range, such as application, origination, commitment, discount, broker, as well as tax and underwriter costs. Some fees can be waived, reduced, or applied toward the closing costs, depending on the lender. Items detailed in the 1000 to 1200 range are usually non-negotiable expenses, such as taxes, city or county documentary stamps and recording fees, and any prorated interest charges.
The third-party category of fees is more difficult to negotiate, and a few appear in the 800 section such as the appraisal, inspection, and credit reporting costs. Though the lender should pass these along without surcharge, and may have been contracted by a set price, there is room for some flexibility. The greatest potential for savings is in the 1100 section, which covers the title insurance, search, and exam, the attorney fees, and the settlement costs. While some lenders prefer in-house affiliation with these services, all are indeed negotiable, and can be shopped for more affordable rates.
While some fees for services are regulated by federal or state government agencies due to the real estate transaction procedures, there is still plenty of cost flexibility when it comes time to negotiate the bottom line on a mortgage.