You’ve scouted out the best mortgage rate and fought hard to get the best price on your new home.
But your bargaining shouldn’t stop there.
You can save hundreds of dollars on your closing costs just by shopping around.
Bankrate's most recent Closing Costs Survey found the average fees due at closing for a $200,000 home now top $2,500, up nearly 6% from the previous year.
While costs paid to third parties for such things as appraisals and title insurance inched down from $672 in 2013 to $662 in 2014, origination fees, which are paid to the lender, climbed from $1,730 to $1,877.
Yet you still stand a good chance of paying less when closing time rolls around if you follow these 8 smart moves.
Smart move 1. Determine which services you can shop for.
If you’re looking to save on closing costs, your starting point should be the Good Faith Estimate, or GFE. The lender is required to give you the GFE within three days of when you apply for a mortgage. The three-page document is a breakdown of all your loan terms and fees.
Under the Real Estate Settlement Procedures Act, lenders are required to use a standardized GFE form, making it easier for you to identify individual expenses.
The GFE will detail which services you can shop for, such as owner’s title insurance, listed in Block 5 of the form, and other services detailed in Block 6, such as the survey and pest inspection. Your lender also will typically allow you to shop for lender’s title insurance and title services.
The lender is required to give you a list of settlement service providers, but there’s no requirement that you use them.
If you find a reputable alternative, the lender will typically accept it.
Smart move 2. Pick your settlement company.
Depending on where your new home is located, you’ll find settlements are handled by title insurance companies, escrow companies, real estate brokers or attorneys.
Your real estate agent or lender is likely to suggest that you use an in-house or affiliated settlement firm. But you aren’t obligated to do so. You might find a better price with an independent settlement company.
“Like shopping for any service, it’s important to find the right fit for you,” says Diane Evans, president of the American Land Title Association.
She suggests you talk to family members, friends and neighbors to help find the right service providers who understand your situation and location.
The 10 biggest mortgage mistakes
A mortgage is the biggest debt most of us will ever carry. That's why it's so important to avoid pitfalls like letting the bank decide how much house you can afford or failing to check your credit before you try to buy. These mistakes can cause you to pay more than you need to, prevent your loan from closing or even lead to foreclosure.
Smart move 3. Know where there’s wiggle room.
You need to understand which prices are locked in and which can change.
If you use a company recommended by your lender, your title services, lender’s title insurance, owner’s title insurance, as well as other services listed in Block 6 of the GFE, can’t increase by more than 10% at closing.
However, if you chose to use service providers not listed in the GFE, there’s no limit on how much the costs could rise.
Smart move 4. See if you can recycle and reuse.
Ask about the title reissue rate. That’s a discount on the cost of an owner’s title insurance policy. If the sellers purchased their home within a certain period of time — often it’s 10 years — and bought owner’s title insurance, ask for a copy of their policy.
With that, you should be able to get a discount on the price you pay.
If your lender and title insurance company are amenable, you also may be able to avoid paying for a new survey if you go back to the company that did the previous survey and ask for an update.
Smart move 5. Use your online and social media skills.
You use social media and the Internet for almost every aspect of your life, so why not use them to help you find a settlement company or service provider?
Look on Facebook for recommendations, and share that with companies you’re approaching. You might be able to get a better price that way.
Also check Angie’s List and with the Better Business Bureau to see what companies get high marks.
How much house can you afford?
This is the first thing you need to decide before you even begin to hunt for a new place to live. No one wants to be house poor, saddled with mortgage payments that gobble up too much of their paycheck. Follow these 5 smart moves, and you’ll find the price range that fits your budget.
Smart move 6. Ask the seller for help with closing costs.
If you’re feeling cash-strapped, you can ask the seller to help pay all or part of your closing costs.
Often they’ll start by offering to pay for certain services, such as a home inspection. But you’re better off requesting a specific dollar amount. Check with your real estate agent for advice on what to request.
Your lender may have limits on how much the seller is allowed to contribute.
Smart move 7. Close near the end of the month.
Of course, you’re eager to get into your new home, but closing toward the end of the month will save on prepaid interest.
With a new loan, you need to prepay interest that accrues from the closing date to the end of the month. So if you close on March 16, you’ll have to pay for 15 days of interest.
By closing on March 30, you’ll only pay interest for March 30 and 31.
Smart move 8. Make sure the costs on your GFE and settlement papers match.
Be sure to check the GFE against the HUD-1, the official document listing all of the actual charges and credits for you and the seller. The HUD-1 must be available at least one day before closing.
If you find that the settlement charges that aren't supposed to increase have risen, or if those that are allowed to rise by 10% have increased by more than that, the lender must reimburse you within 30 days of closing.
Remember, those limits aren't in force if you've hired your own service providers, so you’ll have to hold them to the prices they quoted you.