The invoice for closing costs is the concluding obstacle between home buyers and their new homes, and it can draw an unexpected chunk of money. Closing costs can come in at up to 5% of your home’s purchase cost, so they’re not exactly small change. Let’s talk about some points on how to decrease closing costs.
Point 1: Ask for loan estimate form from lender
It’s a little-known reality that the lender must provide a Loan Estimate form within three business days after you apply for a mortgage. Some lenders will give you a Loan Estimate form even before you apply for a loan. The Loan Estimate gives you an estimate to shop between companies “total costs” and also provides a clearer understanding of particular fees once you’ve decided on a lender.
Point 2: Search where the savings are
The Loan Estimate form presents the total closing costs and cash required to close the loan. The core of your savings is Section C, page 2: “Services You Can Shop For.”
These charges cover:
➢ Pest inspection
➢ Title search
➢ Title insurance binder
➢ Lender’s title policy
➢ Settlement agent. Also asked an escrow agent or closing agent
➢ Title insurance and settlement services
Point 3: Force back on lender fees
Underwriting and originating services are priced at a flat rate by a lender, while others charge for each individually. Just keep an eye on a “funding fee” or “delivery fee.” Ask your lender about them. It might exclude specific fees, or you may think about using another lender.
Point 4: Request seller to contribute
Rarely, a seller might provide money toward your closing costs. Though records are low in many places these days, buyers are bidding hostilely, so sellers don’t make many concessions.
Point 5: View no-closing costs mortgage
This point is very important if you’re short on cash. But the closing costs that you don’t pay upfront will be wrapped into the loan, which will extend your monthly mortgage installments.
Point 6: Try to sign loan papers near the end of the month
You can decrease your cash expense at closing for prepaid or PER DIEM interest for the time between your loan closing and the start of the new month. How much can you keep?
Let see an example:
Multiply your loan amount by your interest rate.
For example: 4% = .04
To find your yearly interest charge, dividing that percentage by 365 presents the daily interest charge.
Next, multiply that figure by the days left in the month to see the savings.
Point 7: Search for a bank with discounts and rebates
Some banks offer existing customers incentives on their mortgages. So before finalizing, search for a bank with discounts and rebates.