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Understanding
Mortgage Loans PART 1
How to Lower Mortgage Closing Fees and Costs
Understanding
mortgage loans is important for every property buyer because your
property
mortgages will does take up the lion's share of your costs. Learn
how to lower mortgage closing costs and fees with our complete Guide to
Understanding Mortgages.
Understanding
Mortgages - What
are Closing Costs and Good Faith Estimates?
If
you are first time property buyer, we do have some sad news for you -
taking a mortgage loan will cost more than just your down payment. When
granting you a property loan, mortgage lenders will happily
bill
you for a colorful list of one-time fees labeled as your mortgage
closing fees.
A recent survey conducted by BankRate
discovered that the average mortgage closing costs in the United States
add up to about
$2,750. This figure does not include taxes, government charges or
escrow fees.
These mortgage closing costs are fees imposed by
lenders to arrange and underwrite a property loan for you. It also
includes professional appraisal fees to confirm the ownership, value
and condition of the property that you are buying. The good news is
that there are time tested ways for you to cut down and lower mortgage
closing costs.
So what are good faith estimates and how are they important to you as a
property buyer?
When you
are applying for a mortgage loan, lenders will often give you an item
by
item list of fees including loan fees, prepaid charges,
inspections, title insurance, taxes and other fees. This estimate of
expenses prepared by your lender is labeled a good faith estimate.
Understanding
mortgage loans means knowing that the good faith estimates are just
rough
figures - Don't be surprised if the actual mortgage closing fees turn
out to be much
higher when your loan is finalized. In some countries such as the
United States, lenders are required to give you a good faith estimate
while in other areas you will have to ask for one.
What
are the Mortgage Closing Fees You Can Lower or Even Totally Eliminate?
When it comes to understanding mortgage loans,
most people do have a vague idea that there will be extra fees and
charges when buying real estate but they still get a rude shock when
they
see their mortgage closing costs for the first time. You can expect
your total
closing costs to run up to about 3 to 5% of the purchase price.
The
good thing about understanding mortgages is being able to single out
which are the fees you can ask for a discount. Let's take a closer look
at how to lower mortgage closing costs:
Underwriting
fees are
charged by mortgage lenders to lower the risk involved in making a
property loan to you. Some critics feel that this fee shouldn't be
imposed because the very nature of lending money involves risk. If your
lender charges an underwriting fee, you should try to ask for a lower
fee especially if you have excellent credit scores.
Funding fees
are charged by lenders to transfer or wire your loan money to complete
the real estate deal. Since this is your lender's job anyway, you
shouldn't have to fork out any money for this. Try to have your lender
waive this fee.
When you are buying a new property, a survey
will be carried out to make sure that your property boundaries are
clearly defined and there will not be any disputes.
If you are
just refinancing, you may be able to get away without having to fork
out any survey fees by asking your lender to recertify the existing
survey. Condominiums and apartments do not require a survey so make
sure
your lender don't charge you for it.
And
we don't stop here - Uncover more proven ways to lower your mortgage
closing fees in the next part of our guide to Understanding Mortgage
Loans:
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