Ways to Save Money

There are mortgage-related closing costs, so don't be shocked.

When your mortgage is in its final stages, you will have to pay closing costs. This amount can vary in your area. Taxes, attorney fees, realtor fees, and lender fees can all fluctuate from region to region and the market area they are in. To guess at an estimate for your closing costs, range it from three to six percent of your total loan amount. To give you an example: a $200,000 loan can have closing costs anywhere from $6,000 to $12,000. It is definitely a good idea to shop around to negotiate these fees. The Real Estate Settlement Procedures Act requires lenders to provide you with a good faith estimate of closing costs within three days of receiving your application.

The closing costs can also include processing fees, document preparation fees, attorney fees, loan origination fees, loan discount points, appraisal fees, inspection fees, credit report fees, assumption fees, prepaid interest, escrow accounts, title search fees and title insurance.

Now, how can you save some money on these costs? Remembering these tips may help you:

Negotiation! Negotiate with the lender on rates and some fees. You may not always get your way, but it can't hurt to at least try. There are certain fees that are a constant in mortgage, and then there are some that are added by the lenders themselves. Costs that are in the lender's control are such things as document preparation fees and lender's attorney fees. Costs they can't control are things like credit report fees, title fees, processing fees, private mortgage insurance, and inspection fees. The lender does not make money from those items; from the others, they do.

Make additional payments on the principal of the loan. Paying extra whenever you can to the principal alone will help reduce the overall loan rather than paying mostly interest with each payment. In fact, you can reduce your mortgage by almost 10 years simply by making one extra mortgage payment per year.

Making bi-weekly, instead of monthly, scheduled payments can also shorten your loan. This builds up an extra payment per year without a big chunk at one time that is very noticeable in your pocket. If you were to follow your paycheck schedule, if it is bi-weekly, you could pay off a 30-year fixed mortgage in about 23-1/2 years.

Avoid private mortgage insurance and try to put down at least the minimum 20 percent so you can avoid paying PMI. If you are already paying PMI, make sure you watch your equity and drop the PMI once you hit 20 percent.

Be sure that if you choose to pay extra points that your lender will accept this. Sometimes it works for you and you save money, but sometimes the lender you are with will not do this. A lot of the major financial institutes now have point calculators online that can help you calculate your interest rate and monthly payment with purchasing points. Make sure that you will be in the home long enough to make this worth your while.