How Much Are Closing Costs? 5 Tips For Paying Less

How good of deal you’re getting on your next home loan depends not on the interest rate, but how much you’re paying in closing costs. How much are closing costs? Your fees vary by region and the type of program you’re choosing; however there are things you can do to pay less. Here are 5 ways to pay less and get a better deal closing on your next home loan.

How Much Are Closing Costs?

The answer to this question depends on you. Did you agree to pay discount points? Are you purchasing or refinancing with an FHA home loan? How much did you agree to pay for the loan origination fee? Are there junk fees in your closing costs like processing, administrative and rate lock fees?

It can be difficult to understand which fees or discount points found on your Good Faith Estimate are necessary and whether or not you’re overpaying. How much are closing costs? Many financial advisors will tell you to expect to pay 3 to 5 percent of your mortgage amount; however, you can do better.

Shopping around and comparing closing costs can save you thousands of dollars AND help you avoid paying lender junk fees. Here are 5 ways to save by avoiding unnecessary fees and comparison shopping correctly.

5 ways to pay less less

  1. Shop Smartly For Your Next Mortgage
  2. Shopping around will help you pay less in closing costs if you go about it correctly. The first thing you need to do whether you’re purchasing or refinancing is choose a program and stick with it. Do you need an FHA home loan with a 30 year fixed rate? Make sure all of your quotes are from this program.

    Comparing quotes on different programs from different lenders will not give you an apples-to-apples comparison of closing costs. Don’t let a fast talking loan officer confuse you by quoting fees on a 5/1 ARM when you need a 30-year fixed rate mortgage.

  3. Pay Attention To The Right Closing Costs
  4. Third party fees are out of your lender’s control and cannot be negotiated. The closing costs you’re interested in are found on page 2 of the new Good Faith Estimate.

    Box A shows the loan origination fee and any Yield Spread Premium offsetting your closing costs. You will also find discount points required to get your mortgage rate.

    Box B items 3 and 6 list closing costs you can negotiate including lender junk fees and items you can shop for.

  5. Beware Unnecessary Discount Points
  6. Don’t agree to pay for a lower mortgage rate. Discount points are a closing cost you pay to lower your interest rate. Mortgage rates are still at historic lows and paying thousands of dollars out-of-pocket just to lower your interest rate by .125% is hardly worthwhile.

  7. Shop The Loan Origination Fee
  8. Your mortgage origination fee can make or break the deal you’re getting. Many brokers quote one percent as standard for loan origination; however, I’ve reviewed community based credit unions that charge as little as $400.

    Don’t be afraid to question closing costs. Many loan officers won’t negotiate closing costs because the lender will take the fee out of their commission. Don’t be afraid to walk away from a loan officer unwilling to negotiate closing costs.

    This includes lender junk fees like loan processing, rate lock, or courier fees. Lenders dream up all kinds of different names for closing costs to confuse the issue. Question everything and don’t be afraid to walk away.

  9. Get Everything In Writing
  10. If your loan officer agrees to modify your closing costs make sure you get it in writing along with your mortgage rate. If you don’t have it in writing it never happened.

    Don’t overlook the HUD-1 settlement statement at closing. This document can be much more confusing than the new Good Faith Estimate but is the final word when it comes to your closing costs.

    If you catch new or higher closing costs on your HUD-1 be sure and question them. Your home is the single most important purchase most homeowners make in a lifetime so never sign any document you don’t fully understand.

How much are closing costs? As you can see there’s no definitive answer to the question and your closing costs depend on how much time you invest shopping for a better deal.

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You can learn more about getting the best deal on your next home loan by avoiding lender junk fees by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to help you find the lowest fees from today’s best mortgage lenders

What is #MyRefi?

Have you been hearing about today’s ridiculously low refinance rates for months now but aren’t sure if you’ll qualify due to your home equity or credit? The government refinance program known as #MyRefi is shaping up to be what people commonly refer to as HARP 3.0. (#MyRefi is called as a hashtag in the twitter world) Here’s the latest HARP 3.0 news and how it promises to help seven million underwater homeowners refinance with today’s best mortgage lenders rebuilding equity in their homes.

#MyRefi: HARP 3.0 News

The Home Affordable Refinance Program was introduced in 2009 as the solution for underwater homeowners who could not otherwise qualify for mortgage refinancing. The goal was to get these homeowners owing more than their homes are worth refinancing with the best mortgage companies and stimulate the economy in the process. Lowering the mortgage payments for seven million households puts more cash in their pockets for spending, a boom to stimulate our floundering economy.

The original Home Affordable Refinance Progarm program fell flat on its face; lack of lender participation and a restrictive 125% loan to value limit prevented the majority of underwater homeowners from qualifying. At the end of 2011, President Obama overhauled the program to by executive order and is now introducing #MyRefi.

The President’s changes under HARP 2.0 eliminate the 125% loan-to-value requirements opening the program up to anyone owing more than their home is worth.

The Fannie Mae & Freddie Mac Requirement

The biggest obstacle remaining despite lukewarm lender participation in the program is the requirement that Fannie Mae or Freddie Mac backs your mortgage loan. In addition to securitizing your mortgage loan with Fannie Mae or Freddie Mac this had to happen before June 1st of 2009. This Fannie Mae/Freddie mac requirement is too restrictive for many underwater homeowners.

Another problem with the revised HARP 2.0 guidelines is that it leaves too much risk for lenders. Most lenders have adopted their own program guidelines, enforcing loan-to-value requirements as low as 105% to minimize their risk.

HARP 3.0 Changes With #MyRefi

So far the HARP 3.0 news is just talk. The new program known as #MyRefi will build on HARP 2.0 to include even more underwater homeowners. The program is not only rumored to eliminate the Fannie Mae, Freddie Mac securitizing requirement but includes provisions to reduce liability for lenders. Lower risk and improved lender participation should reduce fees and make low mortgage refinance rates available to more households. #MyRefi is gaining momentum in Washington with the proposed Responsible Homeowner Act of 2012.

You can learn more about HARP 3.0 by following #MyRefi on Twitter. You don’t need to sign up for an account to follow #MyRefi on twitter. Here’s the link you need: #MyRefi.

Click Here For More Details…

You can learn more about finding the best HARP lenders while avoiding unnecessary junk fees and points by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Underground Mortgage Videos
Here’s a quick sample to get you started finding the best mortgage lenders for your next home loan…

Which Government Refinance Program?

Do you need help with your home mortgage loan but don’t know which Government Refinance Program is right for you? Asking the government for help feels a lot like going to a rich relative with your hat in your hands; however, it doesn’t have to be that way.

You’re a taxpayer and these programs exist to help YOU so don’t hesitate to take advantage of any program Uncle Sam is willing to offer. The problem is making sense of all the different Government Refinance Program acronyms and qualifying rules.

Figuring out your taxes is bad enough these days…peeling back the layers of bureaucracy surrounding a Government Refinance Program is enough to make you crazy.

Government Refinance Program Red Tape

The main problem with any Government Refinance Program is that they’re not user-friendly. Sorting through qualifying rules for HARP, HAMP, and FHA, VA or USDA Streamline Refinance is like reading income tax code. To make it easier for you to decide which Government Refinance Program is right for you I’ve broken the rules down into three easy to digest segments based on the type of mortgage refinancing you need. I’ve also included resources for getting help once you know which Government Refinance Program is right for you.

Start Here For Government Mortgage Help

Most Government Refinance Program help is geared towards homeowners who are underwater in their existing mortgage and cannot qualify for today’s low refinance rates from the best mortgage lenders based on unfavorable loan-to-value ratios. What does this mean to you? If you owe more than your home is worth then you’re underwater. Anyone with a loan-to-value ratio greater than 80 percent, meaning you have less than 20 percent equity in your home can relate to the difficulty this causes when trying to get a mortgage refinance application approved.

HARP 2.0 If You’re Underwater & Can Afford The Payments

If your loan-to-value ratio is greater than 80 percent AND you can afford your monthly payment HARP 2.0 is the Government Refinance Program for you. HARP 2.0 is the newly revised Home Affordable Refinance Program and was recently overhauled by President Obama. Under the new rules you don’t have to document income to qualify, verify employment, or worry about your loan-to-value numbers. There is a catch to HARP 2.0 and you need to be current on your payments. Also, Fannie Mae or Freddie Mac must have your mortgage loan. You can find out more about qualifying for HARP 2.0 by calling a HUD mortgage specialist at 888-995-HOPE (4673).

HAMP If You Cannot Afford Your Payments

HAMP is not a Government Refinance Program but is a loan modification program. HAMP is the acronym for the Home Affordable Modification Program. If you qualify for HAMP your lender will cut your mortgage payment to 31 percent of your gross monthly income. This would allow you to take advantage of today’s low refinance mortgage rates without taking out a new home loan. The list of qualifying rules for HAMP is a bit longer than HARP 2.0; however, here’s the lowdown:

The mortgage loan in question must be on your primary residence and you must have purchased your home by December 31st, 2008. Your mortgage balance must be less than $729,750 and you’ll have to document income and your bills to qualify. Finally, you cannot have been convicted of a felony related to fraud within the last decade. You can find out more about qualifying for HAMP by contacting the HUD help line at 888-995-HOPE (4673).

FHA & VA Streamline Government Refinance Programs

Lastly, if you have a FHA, VA or USDA home loan you may qualify for streamline refinancing. Many of these programs allow you to qualify for mortgage refinancing without getting an appraisal, verifying employment or documenting income. The main benefit of a streamline refinance is a simpler process to refinancing and reduced fees. You’ll have a choice of 30-year fixed, 15-year fixed refinance rates or Adjustable Rate Mortgage loans.

As with any Government Refinance program there are requirements to meet for a streamline refinance and you need to be current on your payments. FHA streamline refinance applications are handled by lenders so enlisting the help of a good mortgage broker can get you qualified while avoiding unnecessary fees. If you’re a member of a community-based credit union that’s also a good starting point for your mortgage shopping.

If you have a VA or USDA mortgage loan you’ll want to contact those agencies directly to find out more. You can learn more about the VA’s Interest Rate Reduction Refinancing Loan by contacting the Veterans Administration at 1-800-827-1000. If you have a USDA mortgage loan you can reach a Rural Development Staff Member at 1-800-670-6553.

Watch Out for Unnecessary Mortgage Fees

Just because you get into a Government Refinance Program doesn’t mean you don’t have to be on the lookout for lender junk fees or markup. The closing costs you pay including the origination fee or unnecessary discount points reduce the benefit you’re getting from mortgage refinancing. You recoup these out-of-pocket expenses by lowering your payment amount; the more you pay at closing the longer it takes to break even.

Do you have an experience with a Government Refinance Program that you’d like to share? Please leave a comment below…

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You can learn more about getting the best deal for your next home loan regardless of which Government Refinance Program you’re in by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Underground Mortgage Videos
Here’s a quick sample to get you on the right foot with your next home loan…

Using a Mortgage Rates Calculator to Decide if Refinancing Makes Sense

If you’re considering mortgage refinancing and want to know if a new home loan is the right decision, using a mortgage rates calculator can help. Many financial advisors will tell you not to refinance unless your new mortgage rate is at least two percent lower than your existing rate; however, a simple mortgage rates calculator exposes this for the bad advice that it is. Here are several tips to help you decide if refinancing is right for your financial situation with a simple mortgage rates calculator.

Mortgage Rates Calculator Basics

Working with a mortgage rates calculator is pretty simple. Plug in your loan amount, interest rate, and loan term and it will spit out your new payment amount. How can you use this to decide if a new home loan makes sense? Instead of relying on an old wives’ tale like the two percent rule of mortgage refinancing, it makes more sense to base your decision on the cost and savings of the new home loan. Every home loan has closing costs and fees associated with it that cut into any potential savings you may realize from refinancing. The mortgage rates calculator shows you how long it will take to recoup these expenses with your new, lower payment.

Mortgage Refinancing Scenario #1

Here’s an example to show you how to use a basic mortgage rates calculator. Suppose for the sake of this example you are refinancing your home for $315,000. The broker is charging you an origination fee of 1.5% meaning that you’ll have to pay $4,725 to close with a mortgage rate of 6.0%. In this example plug the loan amount and new mortgage rate into your mortgage rates calculator and choose a fixed rate, thirty-year loan term.

The mortgage rates calculator determines your monthly payment amount of $1,888 and can display an amortization schedule showing how your home loan is paid down. The previous interest rate in this example was 6.75%, which means the old payments were $2043. Mortgage refinancing in this scenario yields a savings of $155 per month. (Subtract the new payment from the old to determine savings $2043-$1888=$155) That’s a savings of $1860 per year!

Before you can realize this savings from the new home loan you need to recoup the $4,725 you paid the broker along with any other closing costs you are required to pay. To determine the amount of time it will take you to recoup your expenses simply divide your total costs for the new home loan by the amount you’re saving each month. In this example the broker fee is costing us $4,725 so if we divide by the savings we determined from our mortgage rates calculator. ($4,725/$155 = 30 months / 12 months in a year = 2.5 years)

If you’re comfortable with the amount of time it will take to recoup your expenses then the new home loan probably makes sense in your situation. As you can see from the previous example we’ve debunked the two percent rule of mortgage refinancing; however, did you know it’s possible to cut hundreds of dollars from your payment by avoiding hidden markup?

You can learn more about cutting hidden markup and junk fees when refinancing your home by checking out my free Underground Mortgage Refinancing Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c

Here’s a quick sample to get you started by exposing one of your mortgage broker’s dirty secrets.

Refi Rates Without Paying Junk Fees

How can you get the lowest possible refi rates without paying junk fees and hidden markup? Should you comparison shop good faith estimates into the wee hours of the morning or focus your energies elsewhere to avoid overpaying like many of your neighbors? Here are several of my best tips for getting the lowest refi rates and not overpay your broker or lender.

Home Refi Rates & Hidden Markup

Did you know that all of the good faith estimates you get from your bank or lender include hidden markup of one kind or another to boost profit for the person arranging your loan at your expense? It doesn’t matter if the person arranging your mortgage works for your bank, is a broker or is one of those giant web sites like Lending Tree, they all markup your best mortgage refi rates for fun and profit.

Many of your neighbors choose mortgage refi rates from their bank for convenience and because of effective marketing by the bank. The problem with bank originated mortgage loans is that banks simply do not offer wholesale refi rates to their customers. Your bank makes the majority of their profits by selling your home loan to investors on the secondary market. The bank knows that home loans with higher than necessary mortgage rates bring them a premium profit; also, because your bank is exempt from the Real Estate Settlement Procedures Act (RESPA) they are not required to disclose their profit on your home loan or how much they’ve marked up your home loan.

Beware Mortgage Broker Markup

Brokers aren’t much better than banks when it comes to marking up mortgage interest rates. The difference is that brokers are not exempt from RESPA laws and are required to disclose the fee they receive for marking up your home loan along with their origination fee. This fee the broker gets for marking up up your home loan is called Yield Spread Premium and once you know about it you can avoid paying for it. Simply put, mortgage refi rates that don’t include markup for Yield Spread Premium or need points paid at closing are wholesale, or par mortgage rates.

How to Get Wholesale Refi Rates

The good news since you’ve found my site is that you can get wholesale refi rates and save as much as $1200 or more each year that you’re paying on the home loan. You can get started finding wholesale mortgage rates for yourself by changing your mindset when shopping for a new home loan. Instead of comparison shopping mortgage refi rates trying to find the best deal focus your energy on finding the right person to arrange your next home loan. Start by telling potential brokers that you understand Yield Spread Premium and will not accept any home loan that include the markup. Offer to pay a flat origination fee of one percent, which is more than reasonable, and you’ll be well on your way to saving thousands of dollars on your next home loan.

You can learn more about getting wholesale mortgage refi rates for your next home loan while avoiding junk fees by checking out me free Underground Mortgage Refinancing Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c

Heres a quick sample to get you started by exposing one of your lender’s dirty secrets that according to the Secretary of Housing and Urban Development will be responsible for fleecing American homeowners out of Sixteen Billion dollars this year alone.