Monday, December 2, 2019

Top 10 Tips for Saving Money on Closing Costs


The process of finding an optimized home loan option is quite confusing these days. Especially, when it comes with a long list of dues associated with the mortgage.

It is difficult for a common home buyer to understand all the dues and closing costs that come packed with the mortgage. And this is a reason why most buyers cannot tell if they are being overcharged.

Shopping around to find the lowest closing cost can literally save you tons of money.

Before finding out the ways, you can save money on your closing costs. Let’s fist understand what are closing costs and how they are calculated.

What are closing costs? And how they are calculated?

Closing costs can vary from location to location. Typically, it is up to 5% of your home’s purchase price. So, if you are buying a home for $30,000, you should expect to pay up to $15,000 as your closing costs. This is certainly not a small amount.

These costs usually consist of lender fees, third party fees and prepaid funds for interest, property taxes and insurance. The closing costs are paid at the time when the title of the property is transferred from the seller to the buyer.

The urge of home buyers to just pay the money and move in is understandable. But just like you wouldn’t buy a new car or a laptop without searching the prices for other similar products in the market, you shouldn’t settle for high closing costs either.

So, how can you save money on closing costs? Here are 10 useful tips that will hopefully help you in getting lower closing costs.

  1.     Evaluate Lender’s Loan Estimate

When you get the loan estimate from your lender, it is important that you analyze it thoroughly. Go through each item with your lender and ask him about what each fee covers that is mentioned in the estimate, and why does it cost this much. It will give you a clearer idea about what you are paying for and how much you should be paying.

If you pay close attention, you will probably identify some unnecessary fees that do not imply to your particular situation. Discuss this with your lender and it will probably save you some money.

  1.     Compare Costs

The closing costs you will have to pay is not a small amount. Therefore, it makes sense to shop around to find the lowest costs. You can search around for lenders that offer the lowest closing costs. But besides that, you can also search for services that you can shop around which are included in the closing costs, for example, the title search, the pest infection fee, survey fee, title insurance binder etc.

This means that you don’t have to go to the service provider that your lender suggested, instead you can shop around to find the similar services at a cheaper rate. The closing cost services that you are allowed to shop around are mentioned on your loan estimate. So do some research and find some cheaper alternatives.

  1.     Negotiate with Your Lender

To negotiate with your lender about your closing costs is also a good strategy once you have the hang of it. Negotiate your interest rate and closing costs separately.

Ask you lender about the closing disclosure form as soon as possible, compare it with the dues mentioned on the loan estimate form. If there are any discrepancies, ask your lender to justify it.

If your lender doesn’t agree on any negotiation terms, try negotiating with another lender.

  1.     Save on Discount Points when Mortgage Rates are low

Home buyers have the option to pay for discount points in exchange for a lower interest rate. But if you are already dealing with a low-interest rate mortgage environment, you probably don’t have to spend extra on buying discount points. 

However, if you are planning to stay in your home for longer, there might still be valid reasons to pay for these points even when the mortgage rates are low. Each point will cost 1% of the loan value, so paying for discount points can add up fast.

You should discuss with your lender that whether paying for discount points make sense or not according to your loan situation.

  1.     Ask the Seller to Contribute

Depending on the home and the market situation, some sellers might agree to contribute on closing costs. Some others will be willing to lower the sale price of the home you are buying so that the closing costs can offset.

Depending on your situation, you might be able to negotiate with your seller about lowering your closing cost.

  1.     Close the Deal Near the End of the Month

With a new home loan, you need to prepay interest that incurs from the closing date to the end of the month. Therefore, closing towards the end of the month can save you some money on prepaid interest.

  1.     Ask your bank about Discounts

Some banks offer incentives on mortgage to their loyal customers. For example, bank of America offer their preferred rewards members a discount from $200 to $600 on origination costs.

Ask your bank if they have any such discount options available for mortgage.

  1.     Look for No Closing Costs Mortgage Options

No cost home loans are not a new thing in the market. Some of the mortgage companies offer this program of no closing cost mortgage loans. But be aware of the catch that comes with these kind of loans.

No cost mortgage loans use a higher interest rate in exchange for lender credit which is then applied to your closing costs. These no closing cost mortgages are a good option if you are tight on your budget currently but know that these loans might cost you an even greater amount in the longer run.

You should consult with your lender about your financial situation and then figure out the best possible option for you.

  1.     Know which fees can change

Many homeowners don’t know that you are allowed to change certain fees listed on your Loan Estimate.

You can either use a service provider recommended by your lender or you can hire service providers that are not listed on your loan estimate. It is important that you go through your loan estimate form thoroughly to figure out which company/service provider will cost you less.

  1. Use your Internet Skills

Use the internet to stay up-to-date about the latest happenings in the real estate market. It is a great way to find and compare different lenders and their corresponding services.

Look for recommendations from other people.


Buying a home is an expensive task these days. Often, home buyers focus only on getting a lower interest rate that they forget about other opportunities where they might save tons of money.

Closing costs are also overlooked by the homebuyers but they are a major part of the mortgage you are getting. Therefore, it is important that you try and figure out different ways to save money on your closing costs.

Saving money on closing costs will allow you to put more money as your down-payment which ultimately will lower your interest rate.

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