What are the best ways to compare closing costs by state and lender?

1 Know the components of closing costs

Closing costs typically include three types of fees: lender fees, third-party fees, and prepaid items. Lender fees are what the lender charges you for processing, underwriting, and originating the loan. Third-party fees are what you pay to other entities involved in the transaction, such as appraisers, title companies, attorneys, and escrow agents. Prepaid items are the costs that you pay in advance for things like property taxes, homeowners insurance, and interest. You should ask each lender for a detailed breakdown of these fees and compare them across different offers.

2 Use the loan estimate form

The loan estimate form is a standardized document that lenders are required to provide you within three days of receiving your loan application. It shows you the estimated interest rate, monthly payment, and total closing costs of the loan. It also lists the services that you can shop for, such as title insurance and pest inspection, and the services that you cannot, such as appraisal and credit report. You can use the loan estimate form to compare closing costs by state and lender and see how they affect your loan terms.

3 Negotiate and shop around

Some closing costs are negotiable, meaning that you can ask the lender or the service provider to lower them or waive them. For example, you may be able to negotiate the origination fee, the application fee, or the rate lock fee with the lender. You may also be able to shop around for cheaper third-party services, such as title insurance, survey, or attorney. However, some closing costs are non-negotiable, meaning that they are fixed by law or market conditions. For example, you cannot negotiate the recording fee, the transfer tax, or the prepaid items. You should compare the non-negotiable closing costs by state and lender and see how they affect your bottom line.

4 Consider the trade-off between closing costs and interest rate

Another way to compare closing costs by state and lender is to consider the trade-off between closing costs and interest rate. Some lenders may offer you a lower interest rate in exchange for higher closing costs, or vice versa. This is known as paying points or receiving credits. Points are fees that you pay upfront to lower your interest rate, while credits are rebates that you receive from the lender to offset your closing costs. You should calculate how much you will save or pay over the life of the loan by choosing different combinations of points and credits.

5 Review the closing disclosure form

The closing disclosure form is another standardized document that lenders are required to provide you at least three days before the closing date. It shows you the final and actual closing costs of the loan, as well as any changes from the loan estimate form. You should review the closing disclosure form carefully and compare it with the loan estimate form and the offers from other lenders. If you find any errors or discrepancies, you should contact the lender and request a correction or explanation.