Which Settlement Costs Are Reasonable or Negotiable?

January 10, 2000, Revised November 3, 2004

"My mortgage broker gave me the following list of costs…Could you tell me which of these are reasonable and/or negotiable?"

Settlement costs for different services vary from locality to locality. They may also vary with the loan amount and the property value. Sometimes the charge for a particular kind of service is called one thing by one lender and another thing by a different lender. Sometimes the same service can require much more work from the service provider on one loan than on another. Sometimes one large charge (typically an "origination fee") replaces numerous smaller charges. It just isn't possible, therefore, to answer the question of which individual costs are "reasonable".

What matters is the total costs, broken down as between those for which the lender and broker are responsible, and those of third party settlement service providers. The first group include application, origination and commitment fees, points, and other charges made by the lender or mortgage broker. This is the number you should compare across different mortgage brokers or lenders.

These charges along with the interest rate are the price of the mortgage, and price is always negotiable, but only when you are shopping for a loan provider. Once you have made it clear you are committed to a particular lender or broker, don't expect them to negotiate anything.

On third party services, best to read How to Shop Settlement Costs.

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