Closing costs… explained: 3 tips for achieving best value

If homebuyers and refinancing homeowners want to achieve the very best value on closing costs, they should follow these three simple steps:

1. Shop mortgage terms

Since most mortgage lenders today all charge about the same in origination and ancillary charges (i.e., Processing Fees, Document Preparation Fees, Appraisal and Credit Report Costs, Tax Service Fees, Flood Certification Fees, etc.), it’s best to stay focused on the interest rate compared against loan term and payment of any discount points. For example, if you are in the hunt for a 30 year fixed rate without paying “Discount Points,” then compare the interest rate offered by several different lenders.

2. Shop title company settlement fees

While your real estate agent and/or mortgage lender may recommend or refer you to their preferred title company, the title company may not be providing you, the consumer, the best value since they are likely providing a financial benefit to the referral source (i.e., the real estate broker or mortgage company). This means that since the preferred title company is sharing some of its profits with the referral source, they are either charging you higher settlement fees or, at the very least, are unable to provide you lower settlement fees compared than customarily charged in the marketplace.

Thus, it is important that you shop for the best settlement fees among other locally established title companies. A simple Google search for will allow you to compare settlement fees among other local title companies. Be sure to make an apples-to-apples comparison since some title companies charge an all-inclusive flat fee while others itemize numerous charges such as: Settlement Fee, Title Search, Title Examination, Document Preparation/Processing, Notary Fees, Courier Fees, etc.

3. Shop title insurance rates

While nearly all jurisdictions regulate title insurance, which requires title insurance underwriters to file their respective rates, there is very little difference in title insurance premiums among various underwriters. However, while you are shopping for settlement fees with local title companies, check their title insurance rates and inquire as to whether you may be entitled to a “reissue rate” discount on the title insurance premiums to be paid at closing.

Typically, if your seller has owned the property for less than 10 years and possesses an owner’s title insurance policy, you should be entitled to either a partial or full reissue rate; depending on the amount of the existing coverage.