mortgage
New York tops closing costs study

A document called the good faith estimate, or GFE, is invaluable when shopping around. The lender is required to furnish a GFE within a few days of your application. Like a library using the Dewey Decimal System, the GFE is arranged in numbered sections. The 800s and 1100s are the sections to concentrate on when you compare and negotiate.

The 800 section denotes the lender's fees. For example, 801 is the origination fee, 804 is the credit report fee, 808 is often the broker's fee. The 1100s denote title fees (among them, 1102 for the title search and 1108 for the title insurance premium).

Watch for junk

"Question every cost. You don't just have to take it," says Christopher Cruise, who trains mortgage brokers and loan officers. "If it says 'administrative,' or 'doc prep' or 'miscellaneous,' it's just pure junk."

Even mortgage executives, when e-mailing among themselves, refer to these fees disparagingly. According to the August issue of Conde Nast Portfolio, Countrywide executives referred to some fees as "junk" and "garbage." When ordering a low-cost mortgage for a politician, the executives would specify "no junk" or "no garbage fees."

Ordinary consumers didn't get the same consideration.

Beware of double-dipping. Sometimes a broker will charge an origination fee (line 801) and a broker fee (usually line 808). "It's the same thing!" Cruise exclaims.

The 1100 section of the GFE, for title charges, warrants scrutiny, too. If any fee seems unjustified, ask that it be waived.

Compare estimates

It's easy to get hung up on the individual fees and lose sight of the bigger picture. Different lenders give different names to their fees. That can be confusing. To simplify things, compare two or more estimates by adding up the dollar figures in each GFE's 800 section and compare those subtotals with one another. Do the same with the 1100 sections. If any subtotals stand out as unusually high or low, ask why.

"I'm pretty critical, in general, of borrowers who don't ask questions," Cruise says. "For the most part, they don't."

Vote for lower fees

In some cases, there's little that you can do about high closing costs except via the ballot box, because state governments mandate expensive title insurance. The prime examples are Texas, Florida and New Mexico. All three states' average title charges that are hundreds of dollars more than the national average.

These three states have something in common: Their title insurance rates are promulgated by the insurance department -- that is, the state government sets the fees for title insurance premiums, title searches, or both. It's illegal to charge less than the promulgated rate.

To see what your state charges, see the detailed reports. To see how your state stacks up against the others, look at this chart.

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