Many homebuyers, particularly those who are shopping for their first home, focus on the layout, features, list price and amount their monthly mortgage payments will be. Buyers are often shocked by the size of closing costs, which can total thousands or even tens of thousands of dollars.
Closing costs include fees charged by your lender and attorney; a variety of federal, state and local taxes; and charges for several services related to the real estate transaction. You can’t do much about taxes, and your attorney may charge standard fees for all home closings, but you might be able to save a significant amount by negotiating with your lender, shopping around for less expensive service providers and asking the seller to sweeten the deal.
Negotiate Fees with Your Lender
Different mortgage lenders charge a range of fees for the same service. Contact several lenders to inquire about their fees. If one lender charges less than your preferred lender, the lender you want may be willing to match the lower fees to avoid losing your business to a competitor.
Your lender will charge you loan origination and underwriting fees. While you probably won’t be able to avoid them entirely, the lender may be willing to lower them. Your lender may also be willing to waive the mortgage application and processing fees or to bundle them into the loan so you can avoid paying them up front. It can’t hurt to ask.
Save Money on Other Services
Shortly after you submit a mortgage application, your lender should send you a loan estimate form. It’ll include a list of tasks that need to be completed prior to closing, an estimated cost for each, the amount of the mortgage, the interest rate and the monthly payment amount.
The form should include a list of services that are required, but that can be obtained from a provider of your choice. You may be able to find companies to handle the title search, pest inspection and other services at much lower rates than the businesses your lender recommended. If you choose a vendor other than the one your lender prefers, the lender will need to approve the company.
Ask the Seller to Help
Both the buyer and seller are partially responsible for closing costs. The seller generally pays the real estate agents’ commissions. An owner who is eager to sell may also be willing to cover some of your closing costs as an incentive for you to buy the house and move the process along quickly.
Don’t Be Afraid to Negotiate
Many of the fees that make up closing costs are unavoidable, but that doesn’t mean you need to pay top dollar for everything. Real estate is a competitive field, and companies are often willing to work with consumers to earn their business. You might be able to lower your fees simply by making some phone calls to compare rates and by asking your lender and the seller to work with you.
This article is intended for informational purposes only and should not be construed as professional or legal advice.