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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 $3,000 to $6,000, though they can be substantially more. One rule of thumb puts closing costs at 2% to 5% 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 EntitleDirect.com, which operates in 40 states and Washington, DC. There are also regional firms such as TitleForward.com, which handles transactions in Florida, Georgia, Maryland, Pennsylvania, Virginia and Washington, DC, and OneTitle.com, which does business 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.

Next: Jonathan’s Story: Loan

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