The amount that you offer for your home is not how much money you have to have at closing. When you finance a purchase, you will also need hundreds if not thousands of dollars to make deposits into your escrow account for property taxes.
You will need to pay for closing costs as well. Some closing costs are inevitable, such as an appraisal. The lender needs to know that the property is worth roughly the amount they intend to finance. However, other costs may actually be so-called junk fees. Junk fees are extra or excessive costs that serve as a way for the companies involved to make a little more money on a transaction where they will already make thousands of dollars.
Those junk fees may be something that you can negotiate as you get ready for closing.
Which fees are junk fees?
You can’t avoid recording costs and title insurance, but you can sometimes negotiate other closing fees. Mortgage brokers may assess significant fees that show up as application and loan processing fees. Sometimes, the broker lists these costs as broker rebates.
If someone charges you hundreds of dollars for application and loan processing fees, you may be able to push for a change on those costs. Some individuals and businesses inflate these charges because they know people won’t question them. Underwriting and mortgage rate lock fees are other examples of costs that are often arbitrary and negotiable.
One of the ways to avoid surprise fees right before you sign your documents is to ask for pricing information from the broker or mortgage company up front. Those with flat rates or at least transparent fee schedules will usually be better options than those who don’t provide detailed information about what they charge for their services.
Mortgages are already profitable
You will pay significant amount in interest over the course of your mortgage, which means that the lender will make a lot of money off of this transaction. Consumers shouldn’t blindly accept add-on charges, especially if those costs seem disproportionate to the services provided.
Knowing what charges you can negotiate will make buying a home a safer and less frustrating process.