Of course, anyone who is buying a home or property needs to consider closing costs, but what are they? There is, moreover, more about these costs than buyers may realize. These are fees which the homebuyer pays at closing of the real estate property or home.* Typically, the costs can run between $5,000 to $10,000 in addition to a down payment; therefore, knowing what is and is not part of the actual closing costs is vital. Consider these options….
1. Shop around for lenders
Lenders want to make deals now. As I write this, interest rates are 4.3 percent for a 30 year fixed. Most lenders will volunteer their menu of products and corresponding interest rates, and many will provide an estimate for closing costs if you ask for one. Once you have a handful of estimates, compare the costs. Tip: Obviously, anyone with a good credit score should speak directly to a bank or mortgage lender.
2. Reduce fees not performed by 3rd parties
Negotiating fees charged by third parties maybe fruitless. These are fees for attorneys and title searches. In the 800s section of the GFE (Good Faith Estimate): those for the appraisal, credit report and inspection. Unless the buyers have thoroughly checked out the lender, these cost could be marked up. Theoretically, they are negotiable, so ask the lender to seek deals on these three items and pass along the savings. Practically speaking, buyers probably won’t get a drastic break on those services because the lender has contracted for them at a set price. Again, the buyer should research it.
What’s your home worth?
A buyer can realize some sizable savings by negotiating the items in the 1100s section of the GFE: title insurance, title search, title exam, attorney’s fees and settlement fees. Because of my years in the business, I can recommend a title company.
3. A reducing points or the zero-point option
As one would expect, paying points depends on the mortgage the buyer selects that person’s financial situation. Paying points may help reduce the interest rate. (Each point is one percent of the loan amount.)
Tip: Instead adding to the down payment, consider trying to reduce those points. It reduces the loan balance, thus, better rates and terms with a higher down payment.
4. Close at the end of the month
Borrowers typically pay interest for the current month at closing, so close later in the month, then lender collects on a few days of interest, reducing closing costs and borrowers save some money. Anyone with loan balance and interest rate is high will find this effective.
5. Negotiate with the home sellers
This is probably one of the more obvious ways to cut closing costs. Negotiate with the home seller pay for some of the closing costs. Again, this depends on the market for the seller. As I write this, buyers will probably not have a better opportunity for those negotiations.
6. Shop around for mortgage brokers
Experience does matter in this area. Loan officers can set high rates; they usually have discretion (it could be as high five percent). Mortgage brokers earn commissions in exchange for bringing borrowers and lenders together. Those loan points are particularly important now. Buyers pay indirectly a broker’s commission, in the form of closing costs or additional loan points. I can help you find the best rate possible.