How To Lower Closing Costs

    Closing costs help facilitate the sale of a home and both buyers and sellers pitch in. Some closing costs can be paid before the home is officially sold and others are paid at the end. Closing fees run between 3% and 6% of the mortgage; that’s around $9,000 to $18,000 on a $300,000 home.  However, closing costs aren’t set into stone and they can be negotiable. You can ask your real estate agent or lender with help in estimating your actual closing costs.

    The brunt of potential savings will be found in the details listed on the Loan Estimate form in Section C – “Services You Can Shop For”.  You need the legally binding Loan Estimate form to compare costs, not the “Closing Costs Worksheet” or a “Fee Itemization” that some lenders may offer.  The fees on the Loan Estimate form include things like Pest Inspection, Survey, Title Search, Title Insurance Binder, Lender’s Title Ins. Policy and Settlement/Escrow Agent fees.

    Of these fees, you stand to save the most on the pricier services like title insurance and settlement services, which can often be combined. Comparison shopping amongst pest inspectors or surveyors might not amount to great savings, but it doesn’t hurt to do your due diligence and ask for a few different quotes.

    Below are some tips that will potentially help you lower your closing costs:

     

    Loyalty Programs

    Some banks offer assistance or incentives to buyers when they use them to help pay for the purchase. It’s a way for a bank to reward their loyal customers.

    Closing at the End of the Month

    Schedule your closing at the end of the month so you don’t have to pay the per diem interest for so many days.  How much can you save? Here’s how to find out:  Multiply your loan amount by your interest rate — for instance, 4% = .04 — to find your annual interest charge. Dividing that by 365 gives the daily interest charge. Now, multiply that figure by the days left in the month to see your savings.

    Get Multiple Quotes

    Get estimates from different lenders because you’re looking for the best package of closing costs and interest rates. There might be something better out there.

    Consider a No Closing Cost Mortgage

    This option can be helpful if you’re short on immediate cash. However, the closing costs that you don’t pay up front will be folded into the loan, which will increase your monthly mortgage payments.

    Junk Fees

    Some lenders charge a flat fee for services such as underwriting and originating, while others charge them separately. There may be some fees that may be negotiable, such as a processing fee, or application fee. Watch out for fees with vague names such as funding fee or delivery fee.  Make sure to ask if what you are being quoted is the best that your lender can offer.  You may need to look for a different lender that doesn’t charge as many.

    Title Costs

    Sometimes title insurance and settlement are bundled together. You may be able to find a title and settlement company that is less expensive. but if you’re going to shop for title and settlement service providers, move quickly. These firms require time for research and preparing documents.

    The companies your lender recommends might be your best deal. Perhaps your lender negotiated a volume discount, or knows a particular company’s service is outstanding. Outstanding service counts just as much as lower fees here. Try not to get too mired in the line item details–just compare total prices, checking that each quote includes identical services.

    Negotiate With the Seller

    Depending on the market and the home, a seller might contribute money toward your closing costs.  Buyers can ask for credit or to cover lender expenses during the offer and negotiation process.  However, as long as inventories are low and buyers are competing aggressively, sellers will be making less concessions.

     

    You wouldn’t buy a car or a TV without researching prices on other, similar products, and the same applies here. Cutting your closing costs even a little could help you buy a new stove or outfit a nursery once you’re all moved into your new home.  If you have any questions or would like further advice on this topic, please don’t hesitate to contact us anytime!

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