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Closing Costs

AS YOU STRUGGLE to save enough for a house down payment, it’s easy to forget that the down payment is just the beginning. To close the deal, you will face a slew of other costs, including legal fees, mortgage-application costs, title insurance and a home inspection. Together, these costs might add up to $5,000, though they can be substantially more, especially if you have to pay state or local transfer taxes. One rule of thumb puts closing costs at 2% to 6% of a home’s purchase price.

How can you trim that cost? Try shopping around for title insurance, which many experts view as overpriced. Additional competition has emerged from a new breed of online title insurers, notably RadianTitleDirect.com, which operates in 39 states and Washington, DC. There are also regional firms such as TitleForward.com, which handles transactions in a dozen states and Washington, DC, and OneTitle.com, which is based in New York.

Your real estate broker may happily offer the names of a local home inspector and mortgage banker. But you will likely fare better if you do your own search. In fact, it’s probably a bad idea to use a home inspector who lives in the town where you’re buying. The inspector is no doubt anxious to win referrals from local real estate agents and may be reluctant to issue a tough assessment. Meanwhile, there’s a good chance you can get a cheaper mortgage by skipping both local banks and well-known national banks. Instead, look for lenders offering competitive rates by checking websites such as Bankrate.com and HSH.com.

As you budget for a home purchase, keep in mind that you may face additional costs, including moving costs and the expense of some initial redecorating. In addition, there will often be at least a few immediate home repairs, because of problems the seller neglected to mention and the home inspector failed to spot.

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