How To Save Money On Closing Costs
Closing costs are the fees and charges in excess of the purchase price of the property due at the closing of a real estate transaction. Both buyers and sellers may be subject to various closing costs. Closing costs may include fees related to the origination and underwriting of a mortgage loan, real estate commissions, taxes, and insurance premiums, as well as title and record filings.
The amount of closing costs can vary depending on location and the value of the property. As a general rule, homebuyers typically pay between 2% and 5% of the purchase price in closing costs.
Here are some tips on how to save money during closings.
Break down your loan estimate form and understand what each fee is for.
Your lender must provide you with a loan estimate form within three days of your application. This form shows you the estimated closing costs and cash needed to close the loan. You can use this form to compare lenders and negotiate fees
Don’t overlook lender fees.
Lender fees are charged by your lender for processing and underwriting your loan. They may include origination fees, discount points, application fees, credit report fees, and appraisal fees. You can ask your lender to waive or reduce some of these fees, or shop around for a lower-cost lender
Understand what the seller pays for and negotiate with them to pay for some or all of the fees.
Depending on the market conditions and the contract terms, you may be able to ask the seller to contribute to your closing costs. This can lower your upfront expenses and help you afford a higher purchase price. Some of the fees that the seller may pay for include title insurance, transfer taxes, escrow fees, and HOA dues
Think about a no-closing-cost option.
Some lenders offer loans with no closing costs in exchange for a higher interest rate or a higher loan amount. This can save you money upfront, but you will pay more over the life of the loan. You should compare the total cost of a no-closing-cost loan with a conventional loan before deciding which one is better for you
Look for grants and other help.
Depending on your income, credit score, and location, you may qualify for grants, loans, or tax credits that can help you cover some or all of your closing costs. You can check with your state or local housing agencies, nonprofits, or employers to see what programs are available for you.
Try to close at the end of the month.
One of the closing costs that you have to pay is the prepaid interest from the day of closing to the end of the month. If you close at the beginning of the month, you will pay more interest than if you close at the end of the month. For example, if you close on March 6th, you will pay 25 days of interest; but if you close on March 29th, you will only pay 2 days of interest.
Ask about discounts and rebates.
Some lenders offer discounts or rebates to certain groups of borrowers, such as veterans, first-time homebuyers, teachers, or health care workers. You can ask your lender if they have any special programs or incentives that can lower your closing costs
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