3 Tips On How You Can Lower Your Closing Costs

1. New Mortgage Disclosure Form

There’s a new form going into effect in the next few months that’s intended to be easier to understand as well as to make sure that every cost related to taking out a new mortgage or buying a home is clearly laid out.

The new form for closing services is called the “Loan Estimate” and separates your closing cost fees into three simple categories: Origination Charges, Services You Cannot Shop For, and Services You Can Shop For, which will allow you to comparison shop for certain mortgage-related services.

2. Shop Around

By understanding your closing costs (made significantly easier and more transparent thanks to the new mortgage form rolling out this year), you can comparison shop certain services such as title insurance and settlement fees and possibly save yourself thousands of dollars.

3. Negotiate with the seller

Sometimes a seller gets stuck on the selling price for their home — and they won’t take a penny less. If it’s still more than you want to pay, it’s possible that the seller may be open to paying the closing costs on the transaction. Psychologically, they feel they are still getting the price they set for their home, while the amount you will actually be spending will be less. Remember the cost of your new home is more than just the sticker price, it’s that amount plus all the associated fees and charges.

For more tips on getting the best deal on your mortgage, check out these sources:

• Housing prices negotiations stalled? Why closing costs are your best bargaining chip (CS Monitor)


• Mortgage Closing Costs You Can Negotiate Lower (Lender 411)


• Five Tips to Keep Your Mortgage Refinancing Closing Costs Low (Total Mortgage)

 

Phew, Short Sales Didn’t Go Over the Cliff

Debt forgiveness act extended through 2013

As negotiations waged in Washington, D.C. regarding how to avoid the looming “fiscal cliff,” it was unclear until nearly the last minute whether the Administration was going to extend the Mortgage Debt Forgiveness Act of 2007 through 2013. 

The statute was enacted in 2007 and means that homeowners who sell their home at a loss — e.g., in a short sale — are not taxed on the amount of their mortgage not repaid (up to $2 million). The statute was set to expire on the last day of 2012 and it was announced in the early days of the new year that it had been extended.

May save underwater sellers $1.3 billion

Short sales were up year over year in the second quarter of 2012 by 12 percent and in the third quarter by 22 percent according to RealtyTrac. The combination of banks not only smoothing the short sale process but also approving more short sales, along with the not inconsiderable financial advantage of not paying taxes on the forgiven debt, proved distinctly appealing to many homeowners with underwater mortgages.

The Congressional Budget Office estimates that extending the Mortgage Debt Forgiveness Act through 2013 could save taxpayers $1.3 billion.

Via RealtyTrac, TotalMortgage, National Association of Attorneys General, and Huffington Post.