How to get the best deal when you are closing on your home.
To obtain a mortgage, we have to pay miscellaneous fees regarding the title, land surveyor, the government for their taxes and recording the deed, and other expenses; also known as the closing costs. That amount alone can be an additional 6% of the loan. The costs can be flexible, and there are ways to save some money on the cost alone.
- Know that different areas will equal different costs – Not only do certain areas determine the overall price of the home, it could also affect your closing cost as well. Bankrate.com conducted a survey where they asked lenders from each state for an estimated closing cost on a $200,000 single family home with 20% down payment. As of August 2016, Hawaii’s average closing price of $2,655 was the highest while the lowest closing cost was in Pennsylvania with $1,837.
- Some fees are negotiable – Yes, you can negotiate a lower price on some of the fees. One example is your homeowner’s insurance. Start by shopping around to see how much each company will charge you. Some offer discounts by bundling your auto and other insurance together or the age of the house. Not too sure what other costs are negotiable and which aren’t? Ask your loan officer and they will help you out.
- Don’t pay extra money to lower your interest rate – Homebuyers have the option to pay for points in exchange for reducing your interest rate. The cost you pay to lower your rate might not outweigh the cost of interest, especially since interest rates are now low. Another option is if you are not happy with your interest rate, you could refinance to a lower rate in the future.
- Take a look at Reissue Rates – Reissue rates can help lower your overall cost of the homeowner’s title insurance policy. However, not everyone will qualify. Most states require the seller of the home to have purchased the property and insurance policy within the ten year limit for reissue rates for you. You can find this information out by taking a look at the seller’s policy. However, if you are unable to locate the information, ask your title company to help take a look. By doing this extra task, it could shave off hundreds of dollars toward your overall cost.
- Ask the seller if they will pay a portion of the costs – If the seller is struggling to sell their property in a buyer’s market, you can ask the seller to pay a fraction of the closing price. If the seller is motivated enough, they might oblige to the offer. Before you put the offer on the table, ask your real estate agent if this is the right move or not. They are your best resource to you when it comes to negotiation costs between you and the seller.
- Look for red flags when you are reviewing the overall cost – When you shop around comparing costs, feel free to ask questions. For example, if one lender is not disclosing a fee up front, point it out and ask what the charge would be. If you notice one company is charging dramatically less than another company, ask about the price difference. By reviewing and asking questions, you will know how much your closing cost is. If you are not sure of your charges overall, ask your loan officer. They will be glad to explain each item and charge to you.
Closing costs are negotiable since the overall price can fluctuate due to location and size. With the tricks and tips we’ve presented, you can channel your inner “car salesman” and negotiate your way into savings overall.