Mortgage Closing Costs are Negotiable

I worked as a mortgage loan processor for two years, and I was shocked to learn that people can negotiate with the loan officer to lower their closing costs on purchases and refinances.

Most people in this country are aware that you have to haggle and negotiate to get a good deal on a vehicle, but the same is true on a mortgage the majority of the time. There are situations where the loan officer does not earn a commission, and in those cases you don’t have as much room to negotiate.

In most cases, the loan officer or broker gets to put around 1% of the loan amount in their pocket after the closing. That’s a lot of money! The truth is, after a loan officer figures out that you’re eligible for a loan, they’ve already put in enough time with you that they won’t want to lose you as a customer altogether. They’d rather make less on your loan than to make nothing.

My advice is to look at your disclosures with a fine tooth comb. You should get those in the mail within three days of being approved for a loan. Look at things like points and “underwriting costs” and “document processing”. These are padded amounts and a lot of times go directly into the loan officer’s pocket.

You can get another quote from a different lender so you can compare, but remember: every time you have someone pull your credit it lowers your credit score a little. Try to limit the number of times you apply for a mortgage or look at lenders who offer set closing cost amounts for all borrowers.

Once you have that information, call the loan officer and tell them that you’re wondering why their costs are higher than their competitor. Be sure that you’re not making numbers up, because most people in the field know what exactly what their competitors are offering and they can tell if you’re making something up.

Ask if there’s any way that they can come down on the points or the underwriting fees, or things we used to refer to as “junks”.

Another option is to get a government loan. Its a more involved process, but if you get a VA or an FHA loan, they aren’t allowed to charge for extras like underwriting fees and document processing.

Make sure you take your initial disclosure copies with you to the closing and compare it with the closing statement to be sure that there were no mistakes or changes at the last minute.