Type 1: Non-Negotiable Fees
According to experts, certain fees are simply not negotiable when you’re in the process of purchasing a home. Here are the fees you can expect to pay and how (if possible) to get a better deal on them.
- Title fees: Title fees are a part of every home purchase, but they’re a competitive selling point with title companies vying for your business, so if you shop around you can often find a better deal on the same service.
- Title insurance fees: Title insurance itself isn’t an optional purchase. It’s the type and amount of title insurance that can vary here. The Better Business Bureau has a great article that explains how title insurance can vary. For instance, insurance fees vary depending on if there are concerns about an existing title holder or if there are issues that show up later after the initial title search is complete.
- Administrative fees: These fees typically revolve around shipping, delivery, courier, notary and other services required to seal the deal. Most of these fees are fairly well set by industry standards, so little negotiating room is possible.
Type 2: Negotiable Fees
This next set of fees are very much negotiable—some are even optional. But you can’t count on brokers or lenders to tell you where you can save pennies. Only independent research combined with the right questions can ensure you pay only what you absolutely have to in order to acquire the home you want.
- Appraisal fee: It’s certainly at your option whether to get an appraisal before purchasing your new home, but it’s wise to do this (and insurers often want proof of an independent appraisal before issuing coverage). Experts caution it’s best to hire your own independent appraiser rather than opting for your broker's recommendations. This ensures you can shop for the best price and that you can factor out any hidden agendas that may exist between broker and appraiser.
- Application fee: When there’s a house worth tens of thousands of dollars on the table, charging $35 or $50 for an application processing and credit check fee is very, very negotiable.
- Underwriting fees: Unless for some reason you are using an independent lender who underwrites their own loans (some banks do this), you shouldn’t have to pay underwriting fees, especially if you’re using a broker. Be aware that underwriting fees can represent a broad spectrum of fees including processing fees, wire transfer fees, funding fees and other overhead fees that the broker should pay. They’ll pass these fees on to you if they can get away with it, so stay vigilant!
- Prepaid interest fees: Discount points, origination fees and other types of prepaid fees are often offered as part of the closing process. Discount points should only be paid if you’re absolutely certain (as in beyond a shadow of a doubt certain) that you’ll stay in the home for more than five years. Origination fees (fees for the time a lender spends securing a loan for you) shouldn’t be paid unless you’re considered a “high-risk” borrower. In this case, you probably won’t find any options that don't include these fees.