As real estate attorneys, we are often asked by our clients how they can save money when purchasing real estate. They are grateful to us for any suggestions that we can make which result in money remaining in their pockets and/or pocketbooks. The following is a list of strategies that purchasers can use to save money on lender fees, title company closing fees and other related fees.
Lender Fees
● If your credit score is less than perfect, you should consider pre-qualifying with numerous lenders to avoid paying application fees to each one.
● Have your Good Faith Estimate of closing costs reviewed by your real estate attorney who can determine if the fees being charged are unusually high before you decide whether to use a particular lender.
● Never sign a Loan Commitment which is not fully completed by a lender to avoid additional charges appearing at the closing table.
● Avoid paying lender's Private Mortgage Insurance (PMI) by borrowing 80% or less of the purchase price thereby decreasing your monthly mortgage payments. Should more money be needed, consider applying for an additional home equity line of credit ("HELOC").
● Be weary of locking in an interest rate too early or for too short a period. Rate lock extension fees can be substantial and most transactions take approximately 60 days to close (or longer for cooperative units).
● Try to schedule your closing at the end of the month to reduce the amount of prepaid interest that the lender will take at the closing.
● When a lender does not require you to do so, do not escrow for real property taxes and hazard insurance. This will leave you with more cash in hand after the closing and reduce your monthly mortgage payments.
Title Company Fees
● When taxes and insurance are not escrowed, the lender may also not require the title closer to pick up the next real property tax payment at the closing thereby saving you the title company's escrow service fee. And, if the new tax amount is unknown, you will avoid having the title company hold a substantially higher amount pending the determination and payment of the tax and then waiting for a refund of the overage. Alternatively, if the sum is known, request to make the check payable directly to the taxing authority rather than having the sum included in your title bill to avoid paying the title company's escrow service fee.
● Consider declining the Market Value Rider offered by the title company (which increases the insurance amount to the higher of the value of the property and its purchase price, in case the title company is liable for damages due to a mistake). The price of the Rider is usually at least a few hundred dollars, however, statistically title companies rarely make a mistake which obligates them to pay out the full property value.
● Inquire into whether your attorney and/or title company has attempted to locate a survey of the property being purchased. Ordering a new one can cost over $500.00.
● While title closers customarily receive a gratuity from the purchaser at closing, you should review the title bill to ascertain whether the title closer has added a fee for his/her services. The purchaser should be able to decide the amount of the gratuity to be given.
● If a property is being transferred between family members, consider not obtaining title insurance (which may be required by the lender if the purchase is being financed). However, it is unwise to accept title until you have completed and reviewed a title search to reveal whether there are any existing liens.
Miscellaneous
● If the seller retains post-closing possession, make sure that your attorney holds sufficient funds in escrow to cover the cost of repairs in case any problems (plumbing, heating, electrical, etc.) are discovered once seller relinquishes possession.
● Note the termite provision in your contract of sale. Most require the seller to repair any damage if an inspection is done and the seller's attorney is advised of the extent of the damage within a specific period of time. However, if you miss the deadline, the sellers are no longer obligated to make repairs.
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