| Anyone who has ever closed on a house knows | | | | should expect a one-eighth reduction in the |
| the large amount of paperwork that must be | | | | interest rate on your loan, for the life of the loan. |
| signed. The process is stressful, and many people | | | | No cost, no fee loans have a higher interest rate. |
| are not careful to look over all of the paperwork | | | | How to decide which is right for you? Everyone |
| completely before signing on the dotted line. What | | | | has a different situation, but generally, if you plan |
| many people do not realize is how many | | | | on staying in the house for some time, roughly |
| expenses may be added to the loan papers that | | | | ten years, it makes sense to pay points and take |
| careful reading and shopping around could have | | | | advantage of the lower interest rate. Not staying |
| prevented. | | | | in the house for long? Take the loan with no |
| Before you close on a mortgage loan, you will | | | | closing costs and pay the higher interest rate. |
| receive a good faith estimate of closing expenses. | | | | Unnecessary fees over the life of the loan |
| If you are obtaining a mortgage through a direct | | | | There are fees and stipulations that are written |
| lender the good faith estimate should be relatively | | | | into the loan document that can effect you over |
| accurate. If you are using a mortgage broker, the | | | | the life of the loan. Before signing on the dotted |
| statement will be slightly less accurate. The good | | | | line, ask if there is any prepayment penalty. A |
| faith estimate includes all charges that the buyer | | | | prepayment penalty is a fee that you may be |
| is subject to when closing the loan. Because you | | | | required to pay if you pay off your loan before |
| receive the good faith estimate early in the loan | | | | the end of its term. Another hidden problem in |
| approval process, it makes sense to visit more | | | | some loans is negative amortization. If a loan has |
| than one lender to determine who has the lowest | | | | a NegAg, or negative amortization, the unpaid |
| closing costs. This also gives you plenty of time | | | | interest on the balance of the loan is added to the |
| to review the paperwork so that you can ask | | | | loan balance. The final piece of information that |
| about any strange charges that may appear on | | | | you should check your loan papers for is a YSP, |
| the estimate. | | | | or yield spread premium. The yield spread |
| Unnecessary fees at closing | | | | premium is a cash rebate that the mortgage |
| There are many legitimate expenses as part of | | | | broker receives outside of closing. It is based on |
| the closing process, but some companies also add | | | | signing the homeowner up for a higher interest |
| unnecessary, or duplicate, charges to increase | | | | rate than they qualify for. While this does not |
| their profit. If you notice questionable expenses as | | | | increase your out of pocket cost, it does increase |
| part of the closing statement, you can attempt | | | | the amount of your monthly payment, and the |
| to negotiate them away with the lender, or | | | | amount of interest paid over the life of the loan. |
| choose to go with a different loan provider. Some | | | | How to prevent losing money on your mortgage |
| charges that are legitimate are appraisal and | | | | The most common scenario when encountering |
| home or pest inspection fees. If you see listings | | | | unnecessary fees on loan paperwork is that the |
| for underwriting fees, document preparation fees, | | | | attempts to negotiate them away fall on deaf |
| warehousing or loan review fees or tax service | | | | ears. Negotiations are particularly tricky if you wait |
| or real estate broker administration fees, you | | | | until closing to bring your concerns to the table. |
| may want to question them to the lender. | | | | The best way to handle unnecessary expenses is |
| Fees that are paid to a third party, such as | | | | by comparison shopping with good faith estimates. |
| appraisal, credit report and title insurance fees are | | | | Even if you chose to go with a lender that has |
| probably legitimate, but for any fee paid to a third | | | | some suspicious fees, you are in a better position |
| party, the lender should be able to tell you exactly | | | | to negotiate if you can state that other lenders in |
| what you will receive in return for your money. | | | | the area have lower closing costs, and if you |
| You may be asked to pay points on your loan. | | | | initiate negotiations early in the loan approval |
| Points are a specific amount, usually each point | | | | process. By the time you make it to closing, |
| equals between one and two percent of the total | | | | lenders know that most home buyers would be |
| amount borrowed, that you can use to reduce | | | | unwilling to walk, leaving you with little room for |
| your interest. For each point that you pay, you | | | | negotiation. |