Looking for smart & proven ways to reduce closing costs? Honestly, many people step back from buying a home thinking of the size of the down payment, and unavoidable closing costs.
Closing cost is the one last hurdle between the home & first-time buyers. Let us tell you that closing cost usually ranges between 2%-6% of your approved home mortgage which is about $5,000 to $1,5000 on a $250,000 home.
Don’t worry, it’s not that difficult to control the closing costs. For example, you can ask the seller to contribute, save by negotiating the lender fees, and by closing the loan at the month’s end.
Reducing closing costs by even 1% can help you buy other home essential items. So, why not try these simple tips & tricks? Here are the 7 best ways to negotiate closing costs by hundreds, or thousands of dollars!
Compare lenders’ ‘Loan Estimate’ forms
You’ll get your LE (loan estimate) form within 2-3 business days or earlier after applying for a home mortgage. Check the first three pages of the loan estimate form to know the total closing cost and cash you need to close the loan. The loan estimate form allows you to compare the closing cost offered by different lenders, and pick the one with the lowest offer. Always check the reviews before choosing a lender. As a buyer, it’s your right to negotiate and save money. So don’t hesitate to ask the seller or lender to reduce the closing cost.
Experts tip: Before reducing the closing costs, you need to be aware of other potential fees & taxes. Buying a home can be a lot easier if you can save around 2% to 5% of your home mortgage in advance.
Some Key facts about Closing Costs
- Closing costs on a home loan can rise fast.
- Taxes are non-negotiable.
- The closing costs like the origination fee can be reduced.
- To get the best deals, shop around for closing costs like home inspection, home survey, and title insurance.
Know where the savings are:
To check the savings section in the Loan Estimate form, switch to section C- ‘Services you can shop for on page 2. The fee for these services is negotiable, make sure to ask the seller or third parties. It includes:
- Home inspection
- Lender’s title policy
- Title Search
- Title insurance binder
- Settlement/Escrow agent who represents the buyer
Experts’ advice: Shop for the settlement fees and title insurance, as they are the most expensive ones compared to other services. Use this opportunity to save a significant amount of money.
Ask the Seller to Reduce Closing Costs
Requesting sellers to reduce the closing costs at the time of finalizing the home-buying deal works many times. To convince them, you can discuss your budget, income to buy a house, and savings. So, during loan closing, the seller( if agreed) will pay the closing cost rather than the buyer. It can help you save lots of money.
Opt for a ‘no-closing costs’ mortgage
Are you out of budget for paying the closing cost? There is nothing to worry about! Many lenders offer no-closing-cost mortgage options for first-time home buyers. Although the closing cost is rolled into your home loan which further increases the size of your monthly installments.
Want to know the size of your monthly installment? Though it depends on the buying price of the home, your income, and many other factors. You can use our home loan calculator!
Close at the End of the Month
Rather than closing at the beginning of the month, make sure to close the loan at the end of the month. That means you’ll have to pay the interest for a few days more than for the whole month.
No need to Pay Discount Points
As we told you earlier, lowering or negotiating the closing is your right. So there is no need to give away your discount points. Nowadays, the interest rates are already lower, you don’t need to pay for it.
Ask your bank about discounts and rebates
Many eligible banks in America offer discounts and rebates in the form of incentives to their existing customers. You can confirm whether or not they offer the My Mortgage Gifts program or other such rewards to eligible borrowers. IT can help you save hundreds of dollars ($200 to $600) on the origination fee.
Frequently asked questions about Closing Costs
What are the different types of closing costs?
Here is the list of different closing costs that you’ll find on your closing cost estimate provided by the lender. It includes:
- Loan origination fees
- Application fees
- Home inspection fees
- Land survey fees
- Credit check fees
- Home appraisal fees
What Part of Closing Costs is Negotiable?
It includes loan origination fees, rate lock fees, purchase points, and real estate commissions paid to the seller and your agent.
Who Pays Closing Costs?
The closing cost usually ranges between 2% to 6% of the buying price. It covers credit check fees, title insurance fees, appraisal fees, recording fees, and attorneys’ fees. Either the seller or buyer can pay the closing costs as discussed in the mortgage contract.
Can I Negotiate at Closing?
Yes, you can negotiate the closing costs until the last moment of signing the agreement. Feel free to discuss any doubts or queries with the seller or your real estate agent. The only drawback is; it may delay the closing process.
We know buying a homing is not an easy thing to do. The homeowners have to arrange a 20% down payment, closing costs, and attorney fees as well. If you are planning to buy a home or are already in the mortgage process then make sure to negotiate before signing any agreement. Plus there are better chances as many lenders and sellers favor first-time buyers. Save your hard-earned money by following our simple tips & Strategies to lower the closing cost. So, you know now how to reduce closing costs. Don’t hesitate to ask for it, after all, it’s for your benefit.