Avoid Closing Cost Scams on Your Florida Home Loan

Did you know that today’s home buyers are paying EIGHT times more on closing costs than those from 40 years ago? Do you feel as though these fees ripped you off during your Florida home loan process? Afraid of what they’ll amount to as you plan to purchase a new house?

We can help. Listen to how how residents of one Minnesota street were overcharged again and again on their home purchases - many by thousands of dollars - and make sure you avoid these mistakes as you pursue a Florida home loan.

Home buying/closing cost lessons

When Lewis Leung was buying his two-bedroom ranch in St. Louis Park, Minn. in 2004, he read up on mortgages. He got rate quotes from lenders on the Web. He even compared their good-faith estimates of the numerous extra fees he’d have to pay to close the deal.

But did he sign with the lender who quoted him the best combination of rate and fees? Nope. Instead, under pressure to get a loan quickly, he went with the mortgage broker recommended by his real estate agent. Ditto when selecting a title insurer.

“The agent and I looked at a lot of houses together over the months,” Leung explains. “You build up a bit of trust.”

Maybe that trust was misplaced. Going with his agent’s advice cost Leung hundreds of extra dollars in fees and up to $9,320 in higher interest payments over 30 years.

Leung’s agent, Century 21 Luger, benefitted from the process, of course. The realtor’s referrals netted the agency and its affiliates an extra $3,635 on the transaction, though Leung didn’t know it.

“I knew I should do it myself,” Leung says of his decision to go with his agent’s referrals. “But after months of looking for a house, I was tired, and I just didn’t think it would affect my bottom line all that much.”

The complicated home buying process

Anyone that has ever taken out a Florida home loan or bought a house anywhere in the country is aware: while making the biggest financial transaction of your life, there a bundle of fees you don’t quite understand. They’re enumerated on what’s called your HUD-1 document, the mortgage settlement statement you get the day you close, as required by the Department of Housing and Urban Development.

The charges listed include:

• Title insurance
• Settlement fees
• Appraisal fees
• Processing fees
• Document-preparation fees
• Broker’s commission

Most people don’t spend a lot of time on your HUD-1, at least not until it’s too late, because all those fees just run together and don’t seem as though they matter in the big picture - preparing for a Florida home loan is complicated and expensive enough already.

Together, though, these fees add up. Americans spend $110 billion a year buying and selling houses, not including the cost of the homes themselves. While technology has magically lowered the cost of buying everything from airline tickets to stocks to wedding gifts, Florida real estate purchases remain stubbornly expensive.

Regulators have begun to ask why. The Department of Justice sued the National Association of Realtors last fall, claiming that its rigid rules for home listings artificially inflate commissions. And state insurance commissioners in California, Colorado, Florida, Maryland and Ohio have recently uncovered what they say are networks of sham title insurance companies set up to hide illegal rebates to banks, builders and realtors in exchange for steering business their way.

“The current system doesn’t work at all,” says mortgage expert Jack Guttentag, a professor emeritus at the Wharton School and head of Mtgprofessor.com. “Real estate fees are much higher than they’d be if the market worked properly. The whole thing is something of a tragedy.”

The bottom line? Never overlook ANY aspect of a Florida home loan. Ask questions and don’t sign on any dotted lines until you’re satisfied with the answers. Deciding on the best mortgage can be difficult, but understanding the fees involved saves time and money.