Once you’ve made it through pre-approval, your house search, making your offer and securing your loan, it’s time to prep for the last step: closing! Unfortunately, closing brings with it another round of costs – some of which may feel like they’re breaking your personal bank. It’s time to look at how to reduce closing costs.
Closing costs can range from 3% to 6% of the total cost of your home, depending on taxes and transfer fees, and sometimes city, state and county ordinances can factor in (check with your real estate professionals to figure out what’s what). Other costs associated with closing include settlements for your lender, the title insurance company, and your attorney.
Even so, it’s possible to reduce closing costs so it doesn’t feel like you’re in a financial stranglehold. To start, there are some fees that may be negotiable. Look into how flexible your attorney is with their fees, if your real estate professional is flexible on their commission, and if any fees associated with messenger use or recording costs can be reduced in any way. Some mortgage lenders even offer to assist with closing fees, depending on the lender or bank. Check with yours to see if they have some kind of loyalty program.
Another way to save on closing costs is to schedule your closing at the end of the month. Closing your loan at the beginning of the month requires you to pay the per diem interest from the date of closing and every day remaining for the rest of the month. Waiting until at or near the end of the month means you’ll have less interest to pay at closing. Also, you can negotiate with the seller to pay all or a portion of your closing costs – and they might, if they’re super motivated to sell and interested in creating a tax deduction for themselves. It’s not a usual occurrence, but you never know unless you ask. You also have the option to include your closing costs in the loan amount, and while it can cost more to do this, it may mean the difference between landing your property or not, if money is a little tight. Also, if you’re a member of the military, there are programs in place to assist Veterans with home ownership, including the possibility of covering or reducing closing costs. You may also want to consider becoming part of a union, which can sometimes offer discounts on costs associated with closing with participating banks in certain areas of the country. Talk with your real estate professional to make sure you know what’s offered and what’s not.
While closing can tack on some extra expenditures in what’s already a costly process, it doesn’t have to be cost-prohibitive. See if any of these tips can work for you. Who knows? You may be able to shave a few extra dollars off your closing expenses and use that extra money for a nice bottle of champagne to toast your new home!