Ways to Reduce Closing Costs

With home prices at an all-time high, those of us in real estate and real estate-related industries must work together to help home buyers save money wherever and whenever we can. I invite you to consider the following recommendations. Encourage your home buyers to consider the following strategies for reducing closing costs.

Negotiate Fees with the Lender

• Loan Estimate Review - Carefully review the Loan Estimate provided by the lender to identify fees that may be negotiable.
• Ask for Lender Credits - The lender may offer credits, which can reduce upfront closing costs.

Shop Around for Third-Party Services

• Title Insurance - Obtain quotes from multiple title insurance providers to find the best rate.
• Homeowner's Insurance - Compare different homeowner’s insurance policies to get the best deal.
• Home Inspection Fees - Shop around for competitive pricing on home inspections.
• Appraisal Fees - Search for lenders that have access to Appraisal Management Companies with reduced fees.
• Appraisal Waiver - Ask the lender about the possibility of waiving the requirement for an Appraisal Report.

Utilize the Lender’s Special Programs

• No-Closing-Cost Options - Some lenders may offer home loan programs where some or all closing costs are covered by the lender. This is often done in exchange for a higher interest rate.

Down Payment Assistance Programs

• Look into any state or local programs that a lender may partner with who helps with closing costs.
• Search for a lender who offers direct access to down payment assistance programs (DPA).

Seller Concessions

• Negotiate with the Seller - Request that the seller covers part of the closing costs, often in exchange for a slightly higher purchase price.

Timing the Closing

• End of Month Closing - Closing at the end of the month can reduce the amount of prepaid interest due at closing.

Waive Certain Fees

• Waive Escrow Accounts - Opting out of an escrow account (if allowed) can save on initial funding fees.
• Reduce Points - Paying fewer points upfront (or none) can lower closing costs, though it may result in a higher interest rate.
• Reduce or Waive Credit Report Fees - The lender may offer programs where the credit report fee is waived or reduced.

Take Advantage of the Lender’s Vendor Relationships

• Preferred Vendors - The lender might have relationships with certain vendors who offer discounts on services like home inspections or title insurance.

Use Gift Funds or Grants

• Gift Funds - If eligible, you can use gift funds from a relative to cover closing costs.
• Grants and Assistance Programs - Research any grants or assistance programs available in your area that the lender might accept.

Each of these strategies can help reduce the overall out-of-pocket expenses when closing on a home. It's essential to discuss these options with your loan officer to understand what applies to your specific situation.