Dealing with the Settlement Costs of a Mortgage Lender

A Home Buying Article Contributed by Robert Scalia

Dealing with the Settlement Costs That a Mortgage Lender Throws out at You

When it comes to dealing with a mortgage lender, settlement costs are one of the most confusing and irritating features of home mortgages. It doesn't help that the types of costs involved end up varying from not only state to state, but from mortgage lender to mortgage lender.

Confusion also arises over how to deal with them. Some people tend to think these settlement costs are negotiable. In certain case, this is true, but that depends largely on whether you choose to deal with a mortgage broker or a mortgage lender.

What are Some of the Settlement Costs Associated with a Mortgage Lender

When you are dealing with a mortgage lender, the settlement costs can be divided into the following categories: You will almost always have the fees paid to lender, the Lender-controlled fees paid to third parties, the other fees paid to third parties and then, lastly, the other settlement costs.

As a borrower, you should focus mostly on the first category. Lender fees consist of points and dollar fees. Points are nothing but an an up front charge expressed as a percent of the loan amount. Dollar fee, on the other hand, are those specified in dollars. A mortgage lender will usually charge for things like processing, tax service, flood certification, underwriting, wire transfer, document preparation, courier, and lender inspection.

As a shopper, you should be less concerned with what all these various fees are called and whether or not they are warranted or even justified. All that should matter for you is their sum total.

Shoppers will often take account of points when it comes to selecting a mortgage lender because lenders always report points alongside the interest rate. This is in stark contrast to dollar fees and origination fees, which are rarely reported in the media or advertised on television by the mortgage lender in question. That's why it's important that you ask for dollar fees and expect the lender to guarantee them right through to the closing.

So What Bargaining Power Do You Have When It Comes to Settlement Costs and Your Mortgage Lender

Asking your mortgage lender to justify his settlement fees is definitely not the way to go.

Unfortunately, many of the other settlement costs associated with mortgage are also non-negotiable. Lender-controlled fees, for example, are paid to third parties for services ordered by the lender. Included in these are the costs of appraisals, credit reports and pest inspections. A mortgage lender can guarantee these prices so there are no surprises, but he won't negotiate them

All of the other fees paid to third parties may not even be known or controlled by the mortgage lender. The most important of these are title-related services and settlement services.So when it comes to negotiating settlement costs with your mortgage lender, you might want to think twice about pushing to hard on something he can't control and save your bargaining energy for something they can.