Savings After the Sale

Making another attempt to simplify the closing process for consumers, HUD is developing a new standard form for lenders to use when giving consumers good-faith estimates. The forms would specify which charges could change at settlement and by how much, giving customers a better opportunity to compare rates, Sullivan said. The agency is also pushing for lenders to lift requirements that buyers pay application fees before receiving good-faith estimates.

The agency anticipates completing the form by the end of the year. In the meantime, home buyers can look for excessive or unexplained fees under the current process.

A week or more before closing, a buyer should notify the lender that he or she wants the settlement statement that outlines final closing costs, also known as a HUD-1 form, at least a day before heading to the settlement table. Comparing that document to the good-faith estimate can help the borrower find discrepancies. Housing and closing experts say buyers should look for excessive costs, such as being charged $100 for a credit check, which typically costs a consumer about $30.

"There are some common things you can look for, like a $50 courier fee when it only costs $16 to send something through UPS," Gumbinger said.

HUD is also proposing to cap by 10 percent the amount certain closing costs are allowed to increase, while forbidding lenders from changing others, after the good-faith estimate. Currently, lenders are not required to abide by the costs forecast in their good-faith estimate.

There are many fees the lender or mortgage broker should be able to estimate accurately from experience, Sullivan said. "We want to limit the so-called fee creep," he said, and protect consumers from "being offered one thing and paying another -- those last-minute settlement surprises."

Borrowers may also be able to find savings when choosing a settlement agent to handle the closing -- usually a title company or a lawyer. The settlement firm oversees the technical details of closing, arranges a title search to ensure that there are no problems and acts as an agent for a title insurance company. Title insurance protects the lender and home buyer in case ownership is later challenged or an unknown debt related to the property emerges.

"Everything is negotiable; you can always ask a settlement agent to reduce their fees," said Dick Fritts, a vice president at Paragon Title and Escrow. Paragon, which serves Maryland and the District, sometimes gives discounts to repeat customers, he said.

Alison Rind, a real estate lawyer, encourages clients making large home purchases to try to use their leverage to secure discounts. "I say to a client, 'Ask them to waive the closing fee if the title insurance premium is large,' " she said. "Most title companies are amenable to providing credits in these larger transactions. You can shop around to get your best deal."

Buyers are required to buy a lender's title insurance policy that protects the lender's investment, but many also choose to purchase a separate owner's policy.

Those interested in an owner's policy may also be able to keep costs down. The basic version of the owner's policy protects the buyer against unknown debts, like those from unpaid contractors, or problems with ownership of the property that existed before the purchase. An enhanced policy goes further, protecting the buyer from future claims

The difference between the policies can be about 20 percent of the premium, according to several title company officials. "On a $500,000 transaction, that can make a $400 difference," said Todd Ewing, president of Federal Title & Escrow in the District. "Some people like all of the bells and whistles; some people don't."