When you are entering into a real estate contract, you have the option to negotiate several items between the buyer and seller. One of these is closing costs. Someone has to pay them. The average closing cost is somewhere around 14% of the contracted sales price. There are ways to lower this closing cost that homebuyers are required to pay. Buyers need to understand what the fees are that they are expected to pay.
What Are the Types of Closing Costs?
Closing costs can vary. There can be fees that the lender charges as well as taxes. Lender fees can vary depending on if you are using a bank or mortgage broker. If you are considering negotiations, you will not be able to negotiate the taxes portion of any closing costs. As a borrower, you have the option to purchase points that can lower your mortgage interest. This can lower the time over the life of the loan.
How To Save on Closing Costs
Even though you cannot negotiate every aspect of closing costs, you can work on some areas to reduce the amount you will pay. There are several ways to do this. You need to know what fees are negotiable. There are some that are nonnegotiable and some that are flexible. Loan origination fees are paid as a commission to the mortgage broker or lender, this can be lowered if you talk with your lender about waiving processing fees. Some will bundle this for you and others will not. Part of being approved for a mortgage is the appraisal which makes sure the home is worth its listing price and
Some closing fees are set in stone, while others are flexible. The loan origination fee can be negotiated if you can lower this fee and ask if anything else can be waived. Lenders will provide you with a rundown of the closing fees and this can help you determine what is in your budget.
Once you have reached a deal on a specific home you must have already had your lender lined up. Your pre-approval should be done before you begin the shopping process. You need to know how much cash you will have to have at closing so that there are no financial surprises that would cause you to fall through on the purchase.
Title Insurance
Title insurance will come up as an additional cost, but it is something you can shop around for. Oftentimes lenders suggest a provider but they may charge more than you are looking to pay. You are free to shop around for this and you can save a significant amount of money by doing so.
Inspection & Surveying
Just as you can shop around for title insurance, you can do the same with your inspection and surveying. These things can vary in price but will need to be completed for the lender to sign off on the mortgage process.
Review Estimated Costs
Always double and triple-check everything. You want to review anything that is an estimated cost and not counts on that being the final number. Look for additional fees that you may not recognize or that are not disclosed to you. You want clarification and to understand where your money is going.
Cost Assitance
There are special programs available to buyers than can help to cover parts of closing costs depending on your circumstance. This usually is available for first-time homebuyers, lo income buyers, veterans, or active-duty personnel.
For more information on purchasing a home and the home-buying process, contact me!