Question:

What are the closing costs on a mortgage and can they be avoided?

Answer:

Closing costs on a mortgage will include all loan accompanying costs - from loan origination fees, broker’s fee, underwriting fee, government taxes, appraisal, credit reports, termite inspection to fictitious fees imposed by some lenders and referred to as junk fees.

These are all fees that will be termed by the broker/lender as loan incurred. Some will be real and impossible to avoid – such as the origination fee: you can’t possibly avoid paying app. 1-3% of the loan amount to the lender taking your loan.

Other fees may be quite unreal but you have to pay attention if you want to avoid them. The easiest way to avoid being taxed for made up services is to collect quotes from different lenders demanding that they disclose as much loan related taxes as possible at an early stage of the mortgage application. Some lenders will reveal some of their in-house charges at the application level; other charges will depend on the amount of the loan and interest points purchased upfront.

Avoiding Closing Costs - Possible or Not?

Anyways, many of the closing costs cannot be avoided but might be negotiable and you may give negotiation with lender a try, especially if you gather quotes from different lenders. Since they all will be striving to get your loan, citing the better rates offered by the competition may lead to a surprising result. Another approach would be to negotiate with lender to have non-recurring costs rolled into the loan.

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