A down payment isn’t the only chunk of change you’ll need to save before you buy a home. A number of other expenses are rolled into your closing costs.
Closing costs are typically 3% to 6% of the purchase price and include lender feeds, third-party expenses, taxes and transfer fees.
The largest part of closing costs are taxes. The government – city, county and state – is the biggest beneficiary of closing costs, along with your attorney, title insurance company and lender.
Every real estate transaction comes with closing costs, but there are a few tricks you can use to reduce the amount you pay:
Close at the end of the month
A simple way to reduce your closing costs is to schedule your closing toward the end of the month. If you close in the first week, say May 6, you have to pay the per diem interest for May 5-31, but you’ll likely have extra time until your first payment. Close May 30 and you’ll only have to pay interest for a single day, but your first payment will be due in 30 days.
Get the seller to pay
Many loan programs allow the seller to pay up to 6% of the sale price to the buyer as a closing cost credit. If someone is selling their home for $200,000, try making an offer for $196,000, plus 3% of the sale price towards closing costs. It’s tax-deductible for the seller, so they still have an advantage. It might, however, be harder to close this deal in hot markets where sellers receive dozens of bids.
Wrap the closings costs into your loan
Some loan programs allow you to add some or most of the closing costs into your home loan to reduce to upfront charges. You’ll be able to pay off the closing costs as part of your monthly mortgage payment.
Join the military
Qualified veterans and current military members may qualify for a Veterans Administration guaranteed mortgage to purchase their homes. These benefits aren’t limited to just the VA loan – talk to your loan officer about how your veteran status could provide benefits for different loan programs as well.
Call a loan officer at 1-844-77-vLoan to discuss your mortgage needs and closing cost fees. Get a free rate quote to estimate what your closing costs breakdown could be.