When it comes to buying a home, closing costs are easily one of the biggest stressors in the process. Not to mention the variable fees and attorney costs, which could result in a higher price point than anticipated. Mortgage closing costs are unavoidable, however there are some areas that can be negotiated.
If you’re looking to reduce some of your variable costs, here are a few helpful strategies.
#1: Analyze your loan estimate form. Mortgage lenders are required to give you this form within three days of completing your application. But there’s no rule that says you can’t ask for it sooner — so do it! A loan estimate form includes an itemized breakdown of costs including monthly payments, loan amount, and interest rate. There is also a section on the form for additional services like pest inspection, or title search fees. These are direct suggestions from the lender, but you don’t have to take them!
#2: Ask for lower lender fees. There are various costs associated with receiving a loan, like loan origination and underwriting. You won’t be able to get out of them, but it doesn’t hurt to ask if the lender can knock the prices down. In addition, try to get different loan estimates from a variety of lenders so you can compare before submitting an application.
#3: Distinguish buyer and seller costs. It’s important to educate yourself on which fees are associated with buyer and seller. For example, sellers usually pay a real estate agent commission, or might contribute to closing costs. As a buyer, you can ask the seller to pitch in, and notate it as “seller credits” on the loan estimate form.
#4: Consider adding closing costs to your loan (but be careful). If you’re unable to pay for the closing costs in cash, your lender may offer you a way to roll the costs into the loan. While this is a good short term solution if you’re strapped for finances, it could hurt you in the long run since you’re adding to your loan amount and paying interest, therefore adding to monthly payments.
#5: Research grants. This isn’t very normalized, and it should be! Financial assistance programs are provided all across the country for qualified homebuyers, and are particularly helpful for areas like closing costs. You can start by contacting local agencies for a list of programs.
#6. Close at the end of the month. This helps reduce your cash payout at closing, as you’re minimizing the number of days where per diem interest can be applied. You can see how much you’ll save by doing this if you multiply your loan amount by your interest rate, and then divide that by 365 to get your daily interest total. Then, multiply that number by how many days are left in the month.
Although your mortgage closing costs will always be substantial, these loopholes can do a great deal in bringing the overall cost down, and give you some peace of mind.
If you’re looking for a mortgage lender, you’ve come to the right place! Whether you’re buying your first home or wanting to leverage the equity in your existing property, we can help you obtain the best product with the most competitive rates available for your unique situation. Contact us online or give us a call today at (443) 471-4310.