How to Save on Closing Costs
Figure out how much you will need to borrow., Get organized., Begin shopping around for estimates.You will use the Good Faith Estimate when you are researching companies., Keep track of your quotes., Choose the title insurance company you want to...
Step-by-Step Guide
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Step 1: Figure out how much you will need to borrow.
In order to do this, you will need to know how much the home costs.
If you are refinancing, you will need to know the amount you are refinancing.
You should ask for a Good Faith Estimate from your lender, which you can then use to begin shopping around.You might also try using a New House Calculator, which many banks offer online.
This calculator allows you to enter all of your income and information on debt and bill payments in order to help you figure out how much money you are eligible to borrow., You should have all of your important documents related to buying the home in your possession.
These documents might include:
W-2 or 1099 forms for the last two years Your most recent paycheck stub Your last two tax returns Information on assets including bank statements, mutual fund statements, automobile titles, records of investments, real estate titles, and brokerage statements A complete list of debts including credit card debt, student loans, car loans, and child support payments Documentation of credit and equity on hand , Search Google for title insurance and closing costs.
Get as many quotes from local lenders as you can.While the Good Faith Estimate will account for things like home inspections, surveys, and title insurance, you can often find these things cheaper by using a third-party service.The prices of these quotes can very greatly, so you need to make sure you are getting quotes for everything.
Some companies will give you a limited quote that ends up being more when you close.Try to verify that the quote they are giving you is what you will pay at closing.
If they refuse to verify the quote, you should probably cross them off your list of potential lenders. , Use an excel spreadsheet to keep track of the companies you have contacted and the amount that each company has quoted you.
It would be best to get a minimum of 5 quotes so you have a solid data set to compare.
Study each quote carefully.
Make sure you read each item, and that you understand what every fee covers.You will want to make sure that you being overcharged or charged twice for the same thing.If you simply glance over the quote, you might miss an error. , If you feel more comfortable with a company that charges a few dollars more than other companies, you may want to choose that company.
Remember that you do not have to choose the settlement company that your real estate agent recommends.It's your right to choose who you use for title and closing. , Sometimes lenders who are not reputable will pad your loan estimate to make more money off of you.This is where really studying your estimate is a good idea.
Also, you should be on the look out for fees that have similar names, which might be an example of the company trying to double charge you for the same thing.If you see a fee that you don’t understand or which looks like a double charge, be sure to ask the company to explain it to you.
An example of a company trying to double charge you might come in the form of a “processing fee” and an “underwriting fee” existing on the same estimate.
Essentially, they are fees for the exact same thing. , Sometimes sneaky lenders will try to add an unnecessary fee to up their profit.This is why collecting multiple quotes is a good idea.
You can compare the quotes with each other fee by fee.
This not only helps you find the best rates, but it will also call attention to any bogus fees that a lender might have included in the quote.
Examples of junk fees include “warehousing fees,” “processing fees,” and “underwriting fees.” , Be sure that you are satisfied with their answer before you choose to use them as your lender or title insurance provider. , No closing cost mortgage seem like a great way to save money but in most cases the closing costs are simply added to the loan by increases to your interest rate.This means that you’re paying more for the closing costs in the long run because you’re paying interest on the loan that is covering them.
This also means that your house will end up costing you more because of the higher interest rates. , Title insurance and other title related costs make up about 70% of the total closing costs.Many first time homebuyers are unaware that they are able to negotiate these costs by allowing them to choose their title service provider, rather than simply taking the one that their realtor recommends.Different title service providers offer vastly different title insurance premiums and service fees, so it’s always a good idea to shop around and look for the best offer. , The reissue rate discount can save you as much as 40% on your closing costs.The reissue rate allows you to save money on your title insurance costs when you are refinancing your home or when you are purchasing the house from a seller who purchased the house and insurance rate within the last decade.In order to use the reissue rate discount you will need to get a copy of the seller’s insurance policy., Negotiating the payment of the closing costs between the buyer and seller is an important part of the overall sale.This could save you thousands of dollars, if you can get the seller to agree to pay part or all of the closing costs.
Be aware that your lender may have limits on the amount of money that the seller can contribute toward the cost of closing.For example, if you want the seller to pay all of your closing costs, you tell your realtor: “I’m ready to make an offer, but I want the seller to pay all of the closing costs.” Your realtor will likely inform you that the best way to do this is to offer to pay the full asking price and be upfront about your desire to have the seller pay all closing costs.Many sellers will be amenable to this arrangement.
If you only need some of your closing costs covered by the seller, you might tell the seller, “I have $5,000 of the $10,000 closing costs for this sale.
I would like you to cover the other $5,000.
In exchange for your help, I am willing to offer a quick closing and I am willing to accept the house ‘as-is.’” -
Step 2: Get organized.
-
Step 3: Begin shopping around for estimates.You will use the Good Faith Estimate when you are researching companies.
-
Step 4: Keep track of your quotes.
-
Step 5: Choose the title insurance company you want to use.Price is important but so is comfort and peace of mind.
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Step 6: Watch for extra fees and double charges.
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Step 7: Pay attention to fees that show up on one estimate
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Step 8: but not on other estimates.
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Step 9: Be wary of significantly higher or lower estimates.If you receive a quote that has a third-party charge that is much higher or lower than the average charge
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Step 10: you should definitely inquire about it with the company.
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Step 11: Avoid no closing cost schemes.
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Step 12: Recognize what is negotiable.
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Step 13: Look for closing cost discounts.
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Step 14: Ask the seller to help pay part or all of the closing costs.
Detailed Guide
In order to do this, you will need to know how much the home costs.
If you are refinancing, you will need to know the amount you are refinancing.
You should ask for a Good Faith Estimate from your lender, which you can then use to begin shopping around.You might also try using a New House Calculator, which many banks offer online.
This calculator allows you to enter all of your income and information on debt and bill payments in order to help you figure out how much money you are eligible to borrow., You should have all of your important documents related to buying the home in your possession.
These documents might include:
W-2 or 1099 forms for the last two years Your most recent paycheck stub Your last two tax returns Information on assets including bank statements, mutual fund statements, automobile titles, records of investments, real estate titles, and brokerage statements A complete list of debts including credit card debt, student loans, car loans, and child support payments Documentation of credit and equity on hand , Search Google for title insurance and closing costs.
Get as many quotes from local lenders as you can.While the Good Faith Estimate will account for things like home inspections, surveys, and title insurance, you can often find these things cheaper by using a third-party service.The prices of these quotes can very greatly, so you need to make sure you are getting quotes for everything.
Some companies will give you a limited quote that ends up being more when you close.Try to verify that the quote they are giving you is what you will pay at closing.
If they refuse to verify the quote, you should probably cross them off your list of potential lenders. , Use an excel spreadsheet to keep track of the companies you have contacted and the amount that each company has quoted you.
It would be best to get a minimum of 5 quotes so you have a solid data set to compare.
Study each quote carefully.
Make sure you read each item, and that you understand what every fee covers.You will want to make sure that you being overcharged or charged twice for the same thing.If you simply glance over the quote, you might miss an error. , If you feel more comfortable with a company that charges a few dollars more than other companies, you may want to choose that company.
Remember that you do not have to choose the settlement company that your real estate agent recommends.It's your right to choose who you use for title and closing. , Sometimes lenders who are not reputable will pad your loan estimate to make more money off of you.This is where really studying your estimate is a good idea.
Also, you should be on the look out for fees that have similar names, which might be an example of the company trying to double charge you for the same thing.If you see a fee that you don’t understand or which looks like a double charge, be sure to ask the company to explain it to you.
An example of a company trying to double charge you might come in the form of a “processing fee” and an “underwriting fee” existing on the same estimate.
Essentially, they are fees for the exact same thing. , Sometimes sneaky lenders will try to add an unnecessary fee to up their profit.This is why collecting multiple quotes is a good idea.
You can compare the quotes with each other fee by fee.
This not only helps you find the best rates, but it will also call attention to any bogus fees that a lender might have included in the quote.
Examples of junk fees include “warehousing fees,” “processing fees,” and “underwriting fees.” , Be sure that you are satisfied with their answer before you choose to use them as your lender or title insurance provider. , No closing cost mortgage seem like a great way to save money but in most cases the closing costs are simply added to the loan by increases to your interest rate.This means that you’re paying more for the closing costs in the long run because you’re paying interest on the loan that is covering them.
This also means that your house will end up costing you more because of the higher interest rates. , Title insurance and other title related costs make up about 70% of the total closing costs.Many first time homebuyers are unaware that they are able to negotiate these costs by allowing them to choose their title service provider, rather than simply taking the one that their realtor recommends.Different title service providers offer vastly different title insurance premiums and service fees, so it’s always a good idea to shop around and look for the best offer. , The reissue rate discount can save you as much as 40% on your closing costs.The reissue rate allows you to save money on your title insurance costs when you are refinancing your home or when you are purchasing the house from a seller who purchased the house and insurance rate within the last decade.In order to use the reissue rate discount you will need to get a copy of the seller’s insurance policy., Negotiating the payment of the closing costs between the buyer and seller is an important part of the overall sale.This could save you thousands of dollars, if you can get the seller to agree to pay part or all of the closing costs.
Be aware that your lender may have limits on the amount of money that the seller can contribute toward the cost of closing.For example, if you want the seller to pay all of your closing costs, you tell your realtor: “I’m ready to make an offer, but I want the seller to pay all of the closing costs.” Your realtor will likely inform you that the best way to do this is to offer to pay the full asking price and be upfront about your desire to have the seller pay all closing costs.Many sellers will be amenable to this arrangement.
If you only need some of your closing costs covered by the seller, you might tell the seller, “I have $5,000 of the $10,000 closing costs for this sale.
I would like you to cover the other $5,000.
In exchange for your help, I am willing to offer a quick closing and I am willing to accept the house ‘as-is.’”
About the Author
Jose Young
With a background in education and learning, Jose Young brings 9 years of hands-on experience to every article. Jose believes in making complex topics accessible to everyone.
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