August 24, 2016
How to Save on Closing Costs When You Buy a Home
By Abby Hayes on DoughRoller.net
Many future homebuyers spend years saving and planning for a down payment. But when they get ready to actually purchase a home, they’re shocked at the amount of closing costs.
On average, closing costs amount to between 2 and 5 percent of the total purchase price of a home. That can be a hefty fee, even for a modest house!
While certain closing costs are inevitable, buyers have control over some of them. Whether you’re just starting the home search or ending the process for your dream home, you can take steps to save on your closing costs.
1. Shop around for a lender
Because many closing costs are set by the lender, final costs can vary greatly from lender to lender. This is one reason shopping for a mortgage lender is so important. When you shop around, lenders should give you a good faith estimate (GFE) of your potential total costs, including closing costs. Examine the costs line by line to see who is offering the best deal.
2. Negotiate lender fees
Once you have GFEs in hand, you can leverage them to negotiate for lower closing costs with your lender. If you need to, walk through the fees line by line. You may be able to shop around for some individual services, such as an appraisal, or simply get the lender to reduce some of the fees they impose.
3. Check for a reissue rate for your title
Most of the time, you’ll need to pay a fee for a title search and title insurance. A title search ensures that there are no outstanding liens on the home you’re planning to buy. And title insurance protects you and the lender in case something was missed during the title search.
These are typically required costs. However, if the seller purchased the home less than 10 years ago, you may qualify for a reissue rate on the title insurance, which will make it cheaper.
4. Buy title insurance directly
Another way to save on title insurance is to buy it directly, rather than through a larger company or conglomerate. New companies, such as OneTitle, allow buyers and lenders to do this. This can save between 20% and 40% on the total cost of title insurance.