Everyone wants the “best deal” they can get when acquiring a home mortgage. In spite of new disclosure requirements loan applicants remain concerned that some lenders are charging excessive settlement fees and are advised to negotiate all fees as well as the interest rate.
Unfortunately, negotiating fees only works if you were being overcharged initially. Consumers are often surprised at the cost of acquiring financing. Thus, it is easy to presume that one may be being disadvantaged. But, for those lenders who quote realistic fees, there is no room for negotiation.
When one first enters the loan process, lenders are typically reduced to rendering an estimate of anticipated costs. The mandated Loan Estimate (LE) form has in some ways exacerbated the difficulty of borrowers understanding the fees being charged in a loan transaction. Most borrowers will find it easier to understand the one page format describing fees that most experienced lenders provide.
Experienced lenders are now required to provide what they believe will be a “worst case” scenario when doing the original estimate. The new rules hold the lender responsible for any fees undisclosed in the original LE. For that reason, some lenders include some estimated costs for items like pest control reports, home and roof inspections and others that will unlikely be charged but they feel need to be included “just in case”. While some fees are likely to change (i.e.; the interest amount based on the actual day the transaction closes escrow), many fees are basic and should have minimal, if any, adjustment to them when you see them on your final Closing Disclosure (CD).
When someone tells you that they were successful in negotiating a reduction of hundreds of dollars in fees, most likely they were being overcharged in the first place. Why would one continue to do business with someone who, at the very least, tried to scam you?
There is another way that borrowers can be disadvantaged, especially by internet lenders. The phrase one is likely to hear when talking with an internet lender is “our fees are only” and the number is typically lower than any obtained locally. The operable word is “our”. The fee quote usually does not include the non-broker fees like escrow, title, recordation, interest pro-rations, etc. Too often it is only when you are ready to sign loan documents you discover that you were not provided all of the fees by that internet representative.
A reputable lender/broker should provide you a list of all the fees you are likely to see on your closing statement at the conclusion of your loan transaction. Ask the question, “are there any fees not included in your estimate that I might see at closing?”
One quick comment regarding interest rates. There is virtually no room today for negotiating interest rates. These are established by the secondary market investors, principally Fannie Mae and Freddie Mac, and all lenders have to work with the same rates. Finally, the “float down” privilege, wherein one locks a loan rate and then is able to float down to a lower rate if the market adjusts, is with rare exception unavailable. It is very unlikely that a lender who tells you that you can lock and s/he will get you a lower rate will most likely have to change lenders mid-stream in order to accomplish that fact.
Finally, you must trust your instincts or as the phrase goes “trust your gut”! Who asked you questions and did the counseling advising you what might be your best loan option? Who was willing to take the time to explain all the loan details? Who anticipated what you needed to know to make a good loan decision? And when you’ve found that person, stop shopping rates and terms and stay loyal. You’ll be glad you did!