How to Lower Your Closing Costs
After your down payment, closing costs typically come in as your second-most expensive home buying charge. For most buyers, they can be somewhere around 2% to 5% of the total purchase price — or about $4,000 to $10,000 on a $200K home.
When you’re already shelling out tens of thousands for your down payment, not to mention your earnest money deposit and, of course, moving costs, these extra expenses can be pretty stressful — not to mention financially trying.
Fortunately, there are a few ways you can reduce your closing costs and make your purchase a bit more affordable. Here are some of the best ones:
- Ask the seller (or your agent) to contribute. Sellers will sometimes offer a concession and pay some or even all of a buyer’s closing costs in order to get the deal done. They’re more likely to do this if their home has been on the market a while or they’re in a hurry to sell and move on. You might also ask your real estate agent to contribute part of their commission. If you know them well or you’ve done a lot of the heavy lifting in your home search, they may be willing to pony up.
- Shop around for your services. When you get your loan estimate from your mortgage lender, you should see a section marked “services you can shop for.” Use this as a guide to find lower-cost providers in your area. Reach out to pest inspectors, title companies, and other businesses in your city and get quotes from each.
- Lender credits. Sometimes, if you’re willing to an accept a higher interest rate on your loan, your lender will grant you “lender credits,” which you can put toward your overall closing costs.
- Choose a later closing date. As part of your closing costs, you’ll have to pay “prepaids,” which cover your homeowner’s insurance, mortgage insurance, interest, and property taxes until your first mortgage payment is due. If you choose a closing date that is later in the month, this cuts down on the number of prepaid days you’ll have to cover, thereby lowering your closing costs altogether.
- Look for assistance programs. If you’re on a tight income, you might qualify for various closing cost assistance programs and grants. Check with the housing authority in your state and look for private programs in your area to see if you’re eligible.
In some of the cases listed above, you may be able to roll your closing costs into your overall loan balance, which would simply spread those costs out over the entire term of your loan. It would mean a slightly higher payment, though.
Want more information on closing costs and what you can expect? Contact a loan officer at Embrace Home Loans today. We’re here to help.
