Four Ways to Reduce Your Closing Costs

One of the things that keeps some homeowners from purchasing a home is the high amount of the closing costs. Many homebuyers, especially those who are buying a home for the first time, forget about the closing costs which can be in the thousands of dollars. Unfortunately, many buyers get to this stage of the process and then have to bow out of the deal because they have no money for the closing costs. Here are a few ways you can minimize your closing costs and put more money back into your pocket when buying a home.

1. Shop around – One of the common misconceptions is that closing costs are the same regardless of the lender or bank that you use. However, this is untrue. When you are shopping for a lender for your pre-approval loan, ask how much they charge for closing costs. The closing costs are typically between 3 and 5 percent of the loan amount so if a lender charges more than that, look for another lender.

2. Ask the seller to pay some – It is not uncommon for the buyer and seller to share the closing costs. With today’s housing market, many sellers are motivated to sell their home so they will be more likely to split or at least pay some of the closing costs just to get rid of the house and mortgage payment. Even if they refuse to pay some of the costs, it never hurts to ask them.

3. Ask for explanations of fees – Closing costs can be confusing and, as a result, some lenders will take advantage of buyers by inflating costs or adding unnecessary charges. When shopping for a lender, ask each one to explain each of the fees to you if you do not understand them. If they won’t give you an explanation, this is a bad sign. Look for another lender if this happens to you.

4. Double check the list – Before paying you closing costs, look over the list of fees carefully. There is a chance you have already paid some of the fees. For instance, appraisal fees are typically paid before the closing stage. If you see appraisal fee as one of the charges on the list of closing cost, let your lender know it’s already been paid. If you see one of these charges that you have already paid, there are likely others.

These are just a few ways you can reduce your closing costs. Don’t let the amount of the closing costs keep you from your dream of owning a home. Minimize them as much as possible and use the money you save for decorating your new home.