Fight to the end for savings

You looked hard to find the right house. You negotiated the right price and shopped around for the best mortgage rate.

But you're not done shopping yet.

Home buyers can squeeze out extra savings at the closing table if they negotiate on fees charged by lenders, closing companies and title insurers. Some buyers can push sellers to cover a portion of their closing costs, and the slow housing market is also giving them leverage to negotiate discounts from some of the professionals involved in settlement, experts say. Any savings can be particularly welcome to buyers already squeezed by lenders' demands for heftier down payments.

Closing costs vary by locality and loan size, with taxes the main difference, but they usually amount to 2 percent to 5 percent of the home's price. Nationally, that translates to an average $3,681 on a $200,000 home loan, according to Bankrate.com, a financial information site.

But there are other variations in how much home buyers pay in closing costs, according to a report released during the spring by the U.S. Department of Housing and Urban Development. The report found that minorities and those without college degrees pay more in closing costs. Borrowers who completed college, for example, were charged $1,100 less than borrowers who did not, according to the report, which analyzed data from Federal Housing Administration-backed loans.

The study also found that borrowers who used mortgage brokers paid higher closing costs than those who didn't, a finding the industry disputes.

To ensure that they are not being overcharged at closing, home buyers should eliminate junk fees and ask for discounts, housing experts said. Ask the lender for a written good-faith estimate, which is required after you apply for the loan, and then compare the closing costs with competitors' charges. Some things are non-negotiable - county transfer taxes, for example.

But that shouldn't stop buyers from challenging other settlement costs, said Brian Sullivan, a HUD spokesman. "Shop until you drop. I know it's easier said than done, but do it anyway," he said.

The complexity of closing may inhibit some buyers. Nearly a quarter of homeowners interviewed in a Federal Trade Commission survey last year could not identify the total amount of their settlement costs.

"One of the main ways to save money is to be that person who is really, obviously on the ball. Otherwise, ask a lot of questions about the closing costs, and maybe every week or so, ask about the status of the loan," said Holden Lewis, a reporter for Bankrate. "Ask: 'Why am I paying a documentation fee and a processing fee? Why am I paying an application fee and a commitment fee?' I have heard some places are charging e-mailing and PDF fees; what's that?"

But comparisons may be difficult: "One lender may include a document preparation fee that the other doesn't, but the second lender has a processing fee," said Keith Gumbinger, vice president of HSH Associates, a mortgage-information company based in Pompton Plains, N.J.

HUD is developing a new standard form for lenders to use when giving consumers good-faith estimates. The forms would specify which charges could change at settlement and by how much, giving customers a better opportunity to compare rates, Sullivan said.

The agency anticipates completing the form by the end of the year. But home buyers can look for excessive or unexplained fees under the current process.

A week or more before closing, a buyer should ask the lender for the settlement statement outlining final closing costs, also known as a HUD-1 form, at least a day before heading to the settlement table. Comparing that to the good-faith estimate can help find discrepancies. Housing and closing experts say buyers should look for excessive costs, such as $100 for a credit check, which costs a consumer about $30.

"There are some common things you can look for, like a $50 courier fee when it only costs $16 to send something through UPS," Gumbinger said.

There are many fees the lender or mortgage broker should be able to estimate accurately from experience, Sullivan said.

"Everything is negotiable; you can always ask a settlement agent to reduce their fees," said Dick Fritts, a vice president at Paragon Title & Escrow. Paragon, which serves Maryland and D.C., sometimes gives discounts to repeat customers, he said.