How Suze Orman Says You Can Save Thousands in Home Buying Fees

Is it really possible to cut your closing costs? Suze Orman thinks so.

When you purchase a new home, you don't just have to consider ongoing mortgage payments when assessing how expensive your property will be. There are upfront fees to pay, which you'll need to cover at closing. Closing costs can add up to 2% to 5% of your home loan's value, which is usually a hefty sum.

The good news is, most people have some options to reduce the initial fees they end up paying when purchasing a home. In fact, finance expert Suze Orman has offered some tips that could potentially save you thousands.

Here's how Suze Orman suggests cutting closing costs

According to Orman, there are a few key ways to lower your closing costs and pay less upfront fees. It all starts with the Loan Estimate that mortgage lenders are required to provide to potential borrowers within a few days from the time the borrower has applied for a mortgage.

The Loan Estimate "means you can make an easy apples-to-apples comparison of mortgage options from different lenders before you decide which lender you want to work with," Orman points out. By comparing costs, borrowers can find the lender offering the most affordable loan overall including upfront fees and ongoing expenditures.

Orman also advises taking another crucial step to try to lower closing costs. Specifically, she urges borrowers to negotiate on the fees they may have to pay as a condition of getting a loan. While not all fees are negotiable, Orman suggests borrowers can haggle over these fees:

• The upfront loan origination fee. This is the amount a lender charges just to make the loan, and it could be as high as 0.5% to 1% of the entire borrowed amount. This fee alone costs several thousand dollars for most home loans, so it's worth looking around for a lender that doesn't charge it or trying to get the lender you're hoping to work with to drop its fee.
• Homeowners insurance. Getting quotes from several insurers can help homeowners find the company offering the best rates.
• Property tax and insurance escrow. Orman explains some lenders require borrowers to prepay several months of property tax and insurance costs, which is then put into an escrow account to pay these bills when they come due. Orman says she doesn't like this at all, because you're tying up money by prepaying and the escrow account leaves the lender responsible for paying property tax and insurance on time. She urges homeowners to take on this responsibility on their own.
• Title insurance. This type of insurance protects against defects in your ownership interest in the house. Usually, you have to buy both lender's title insurance and title insurance to protect your own interest in the home. Orman believes it's a good idea to shop around for both types of title insurance as you could potentially get a cheaper policy than one offered by the provider your lender usually works with.

By taking the time to shop around and compare lenders -- and by negotiating on these common closing costs -- you could potentially save yourself thousands of dollars when buying your home. As a result, Orman's advice here is definitely worth considering.