Utah Homebuyers Can Save On Closing Costs !

The following article was part of the series we publish in the Salt Lake Tribune each week.

Under the heading "Presidents Message" we try to provide Utah Realtors and their clients helpful information on a weekly basis about Real Estate in Utah.

We had some favorable comments about this article from Realtors and home buyers alike so we thought we would share it.

When it comes to purchasing a home, many buyers invest considerable effort in negotiating the best price possible and asking the seller for various extras as part of the deal. But when it comes to the fees they'll pay at settlement, buyers are less knowledgeable about getting the best deal.

Closing costs are the charges associated with getting a loan and transferring ownership. They may include fees for the loan application, mortgage origination, credit report, title search and insurance, appraisal, recording, etc. - costs that can ultimately add up to thousands of dollars.

While some of the costs, like the government's recording charge, cannot be negotiated, others can. The key is to be prepared and do your research before and throughout the process.

A recent article in USA Today, "Savvy home shoppers can save at settlement," reminded buyers that one of the best ways to save on closing costs is to prepare early during the house hunt. Buyers should start by becoming familiar with their credit score, which at a minimum should be 620 for an FHA loan and 720 for a conventional loan. Then buyers should learn about what to expect during the mortgage process by doing some Internet research and asking friends and family members about their experiences.

That know-how alone could provide savings since lenders appeared to make lower-price offers to borrowers who seemed more familiar with market terms, said a 2008 Urban Institute study quoted in the article. As you work to build your own knowledge, valuable online resources will include the U.S. Department of Housing and Urban Development's Web site, www.hud.gov, and the Federal Reserve's site, www.FederalReserve.gov. Both offer valuable information about what to expect in regard to settlement costs.

Once you're ready to visit the mortgage office, make sure to bring your paycheck stubs, recent bank statements, tax information, and numbers for savings accounts, stocks and cash-value insurance accounts, recommends one expert quoted in the USA Today article. Then request that the lender give you their best rate because you are comparing fees between multiple lenders.

As you compare the costs from various lenders, take a close look at the Good Faith Estimate, a document that lenders are required to provide three days after you apply for a loan. The 800 section of the form deals with the lender's fees and the costs of services the lender will contract. While many of the third-party services like the credit report are probably non-negotiable, ask your loan officer if he can reduce any of the administrative-type costs.

The 1100 section may also provide savings, since you can also shop for your own title company. Just make sure to let the lender know of your intent, and ask the title companies to include all relevant costs in their price quotes. In its publication, "A Consumer's Guide to Mortgage Costs," the Federal Reserve Board suggests another way to save on title insurance: Ask the seller's title company for a "re-issue" rate if the seller has only owned the home for a few years. There will be less work for the title company, which means potential savings for you.

Because the costs noted on the Good Faith Estimate can change between application and closing, ask the lender if you can get a guarantee on any of the costs quoted. One day before settlement, you can also request to see the HUD-1 statement which outlines all the final costs. Carefully scan this document and question any discrepancies between it and the Good Faith Estimate before you sign any closing papers.

Asking your lender about any questions you have along the way will also prove valuable, because the more you know about the settlement process, the more likely it is that you'll be able to save money at closing.

To learn more about the entire real estate purchase process, contact your local Realtor.

Published Monday, June 22, 2009 9:37 AM by Chris & Berna Sloan Filed under: Real Estate, Utah