Don’t be surprised by high 3rd-party closing costs
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Editor’s note: Guest blogger Cheryl Cox lives in Austin, Texas, and is the founder of TitleClose.com, a technology company serving the real estate industry.
Your mortgage lender charges fees to provide a loan — but you’ll need to pay other costs, in addition to the lender’s fees. These other fees, charged by service providers other than the lender, can include:
- Closing and settlement charges
- Title insurance
- Property taxes
- Courthouse recording fees
- Taxes — city, county or state, if applicable
These third-party fees cost an average of nearly $1,100 nationwide. But you can shop around — no, make that you MUST shop around. Seriously when would you ever spend $1,100 and not shop around? Here’s how to get the best deal on non-lender mortgage costs.
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Determining the fees can be tricky
So what are you paying for with these third-party charges? The various services that are provided assure, for example, that the seller has the right to sell the house to you, the buyer, free and clear of any other claims to the property. You wouldn’t want to just take the seller’s word for it, would you?
You’re also buying assurances that any money owed on the property, like a mortgage or taxes, are paid and current before you take ownership to a property.
In addition, your closing agent follows the instructions agreed to in the purchase contract so that monies are paid accordingly to the seller. The closing agent charges a fee for completing these sorts of important tasks.
Also, lenders have different requirements that might impact your fees.
Many require that the buyer or owner of the property provide lender’s title insurance to protect the lender as the holder of the loan. In addition, owners can elect to buy owner’s title insurance coverage for themselves, thereby protecting their rights to ownership of the property.
Title insurance fees can be complicated. Some are set by the state or other government bodies. Some are set by title insurance underwriting companies, the firms that actually pay if you have a claim. This might make it difficult for your lender, particularly a large lender serving many communities or states, to tell you what the accurate title insurance fees in your area are.
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Estimating your closing costs
The Consumer Financial Protection Bureau’s website, under its Owning a Home section, has created tools to help home borrowers shop around for third-party service providers.
The bureau says your lender is required to supply a list of providers so you can compare costs, or you can make a choice that’s not on the list if your lender agrees. You also might ask friends or family for recommendations, or look for providers online.
Or, you might turn to a website such as TitleClose.com, which allows you to compare closing and title service providers by service area, rating, price or other factors such as language preference.
Google also can help with some of the research you may need to complete your transaction.
Buying a home can be complex and confusing, but tools continue to evolve to help informed consumers make the correct choices for their situation.
Follow Cheryl Cox on Twitter: @TitleCloseUSA
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