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Don't Fall Victim to Closing Costs

by Kristi  Shibata
Mortgage Directory Columnist

Just when you think you have a handle on your mortgage and finances, you find yourself considering refinancing, and yet thrown again into the mortgage application phase. But the benefit to refinancing - you are already equipped with the knowledge to understand what fees should be charged at closing and what are padded costs charged by the lender.

Closing Costs Checklist

When working with your lender to refinance your mortgage, keep these points in mind before signing the dotted line:
  • Good Faith Estimates Once you have selected a lender and the application process is in motion, your lender is required to provide a good faith estimate within three working days. This disclosure includes all estimated lender and third party fees and gives you a solid overview of your closing costs.
  • Lender Fees These are perhaps negotiable before closing. Such fees can include loan origination fees, discount points, administrative costs, underwriting charges, documentation fees, and wire-transfer fees. It doesn't really matter what they are called -- look at the total lender charges when comparing deals between lenders. These are the fees that should be used in an annual percentage rate (APR) calculation, which can be very useful in comparing identical loans with different rates and fees.
  • Rate-Lock Fees It shouldn't take that long to close on a refinance, and most lenders offer a 15 or 30 day rate lock at no charge. If you won't be closing on your mortgage for some time and are concerned that interest rates will rise, consider paying for a longer-term rate lock. This ensures that your rate will not increase even if market rates do. For even more security, ask for a 'float-down' which will allow you to close at a lower rate if market rates drop during your escrow.
  • Third Party Fees These fees cover appraisals, attorney fees, title insurance, escrow services, inspections and other services provided by outside firms. While you don't get to choose your appraiser for obvious reasons, you can choose your title and escrow firm if you prefer. Often the firm you closed your first mortgage with can give you a discount on your fees when you refinance. In any event it can't hurt to ask or to call a few companies and compare rates.
  • Validating the Estimate When you close on your new refinance you will receive a form called a HUD-1. This is a final list of your charges and unless your loan officer has discussed changes with you it shouldn't vary from the original GFE by much. Do not sign any final documents if any of the charges are in question -- when closing on a mortgage there should be no surprises.
The Wall Street Journal

About the Author
Kristi Shibata is a public relations and communication specialist and regular Mortgage Directory columnist. She graduated from University of California, San Diego, with a BA in Communications.

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