There are costs incurred over and beyond the price of the property by both sellers and buyers of a real estate property to complete a real estate transaction. These costs are referred to as Homeowners' closing cost. Costs like title search fees, survey fees, loan originating fees, underwriters fees, and many more are found on the lenders Good Faith Estimate (GFE). They average 2% - 7% of the purchase price of the property.
These costs could be on the high side; depleting the returns the Homeowner is meant to enjoy. Rather than commit to the payment of these fees without an attempt to reduce them; hence putting more burden on the Homeowner, there are many basic ways the Homeowner can legitimately minimize the closing costs.
1. Cost comparison
2. Obtain mortgage at month end
3. Include closing cost in the loan
4. Scout a loyalty program
5. Request the seller to pay
6. Avoid paying mortgage points
7. Examine the loan estimate
8. Join the army
9. Join a union
10. Negotiate with lenders
Because of the high cost of closing cost, there is a need to compare the cost of different lenders and choose the lowest one. This would enable minimizing the closing costs. You can even ask your preferred lender to match the lower cost being offered elsewhere or lose doing business with you. Your preferred lender would oblige. Also, you can negotiate with different service providers and chose the ones with lower cost offerings. You are not compelled to accept the service provider(s) your lender brings. Just as you have quotes from multiple lenders, you can have quotes from numerous service providers also. Choosing the offers with the lowest cost helps to reduce the Homeowners closing costs.
Lots of cash can be saved up front by obtaining a mortgage at the end of the month as against at the beginning of the month. Obtaining a mortgage at the beginning of the month makes the prorated mortgage payment for the same month added to the closing cost. This drives the closing cost higher even at the initial stage. Contrary to that, and quite advantageous is obtaining a mortgage at the end of the month. This provides much lesser cost at the initial stage as the prorated mortgage payment is lesser. Although you are not paying less of your overall mortgage payment, you are paying lesser at the initial stage; thereby reducing the closing cost.
You currently have thousands of dollars running as loan; including the agreed closing costs in the loan would be a way to minimize the closing costs and grant you access to owning a houses yet with less cash up front. The lenders would charge interest for this but the provision of the needed fund to meet the needs far outweighs the cost.
Financial institutions offer to help with the closing costs for their subscribers; most especially those that finance the purchase through the bank. The Bank of America for example offers a reduced origination fees to selected subscribers as a way of rewarding customers.
Some sellers are willing to lower the purchase price of the home to minimize the closing costs. Many loans also offer sellers the opportunity to contribute as much as 6% of the purchase price as credit to closing cost. The willingness of the seller and the opportunity provided by the loan system enables the seller to yield the request of the buyer; whose negotiation and motivational skills help drive down the closing cost.
Mortgage points are smart buys; lowering the monthly interest rate payable on loan, and enabling savings of money over a long period of time; usually the lifetime of the mortgage. However, in consideration of closing costs, one point bought would cost 1% of the total mortgage; making up thousands of dollars at closing. Are you serious about minimizing the closing cost at the end? Avoid paying mortgage points.
Loan estimate breaks down the component of the loan; specifying the details of the loan. Rather than just carelessly go through the Loan estimate, carefully and consciously go through the details of the estimate to identify possible padding. Similarly, this careful examination ensures that fees are not charged twice as questions are asked on grey areas for clarity.
The military personnel oftentimes have benefits to closing costs. They qualify for funds that help them purchase a house at a reduced price. To benefit from these, you have to join the army and carry out a thorough research to know and benefit from all that the grants available.
Membership of some unions as AFL-CIO receives rebates and discounts to purchase a home from programs as the United Plus Mortgage Program.
Having agreed the fees with the lenders, ask for obscure fees to be used to knock off the final price tag. Ask lenders for Closing Disclosure form; details of your final closing costs. Upon receipt, compare same with the Loan Estimate and probe for clarifications in case there is any difference.
Owning a home should not be deterred by the seeming high closing costs. Realize your dreams and maximize your life by minimizing the closing costs using the basic ways aforementioned.
CONTINENTAL TAX AND ACCOUNTING SERVICES