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Home Real Estate

4 Strategies for Avoiding Closing Fees

Naomi Wilson by Naomi Wilson
April 6, 2022
in Real Estate
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If you are one of the many home purchasers who make it to the end of escrow only to be confronted by fees and taxes, you have probably pondered how to minimize closing expenses when purchasing a property. Closing expenses, which represent an extra portion of the purchase price, may undeniably reduce the thrill of purchasing a property. While it is hard to eliminate all closing charges, certain fees may be decreased or redistributed via negotiation. Continue reading to learn how to save on closing costs as much as possible.

Table of Contents

  • 1. Include Closing Charges In Your Loan Amount
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  • 2. Request That The Seller Cover Your Closing Fees
  • 3. Inquire About Closing Charges Paid By The Lender
  • 4. Agree On Closing Fees With Lenders
  • Endnote

1. Include Closing Charges In Your Loan Amount

Closing expenses are associated with refinance loans, just as they are with home purchase loans, and they are usually around the same price. Homeowners who want to refinance their mortgage can search around for the lowest closing charges. However, there is no house seller to assist them in making payments. On the other hand, current homeowners can incorporate closing expenses into their loan amount. Remember, you’ll continue paying off those closing expenses (and the interest on them) until you pay off the mortgage, sell the house, or refinance again.

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2. Request That The Seller Cover Your Closing Fees

Many buyers can avoid paying closing expenses by having the seller pay them instead. This is referred to as seller concessions. Typically, the funds are derived from the selling revenues. As a result, the seller is not required to write a check because the amount is removed at closing.

It’s important to note that cash-back is not an option here. The entire sum of the buyer’s closing cost of selling a house is the most that can be offered. Furthermore, the amount of money a seller can give to the buyer’s closing fees is limited. These restrictions vary depending on the loan type.

It is not commonplace for sellers to make compromises. The fundamental difficulty is that in a buyer’s market, sellers are generally only ready to pay the closing fees. However, in a seller’s market (one with buyer rivalry), sellers are significantly less likely to strike such a bargain. In this situation, you may wish to explore elsewhere for assistance, such as a closing cost assistance program.

3. Inquire About Closing Charges Paid By The Lender

Some lenders offer their own programs that can assist with closing expenses and down payments. These are provided in the form of a lender credit. A lender credit usually indicates that the lender will cover some or all of your upfront fees in return for a higher interest rate. Separately, it offers down payment assistance.

4. Agree On Closing Fees With Lenders

Loan estimates are only proposals, and you are also free to bargain. If you receive estimates with lower interest rates but higher closing fees, contact the lenders and have them compete for your business. Don’t anticipate your closing fees to disappear entirely. By just asking, you may be able to significantly reduce your upfront expenses or even your interest rate.

Endnote

Buyers and sellers are often responsible for their own closing fees. A property buyer is likely to spend between 2% and 5% of their loan amount in closing expenses, while a seller may pay 5% to 6% of the sale price to their real estate agent.

However, this is not always the case. Buyers may be able to ask someone else to cover part or all of their out-of-pocket fees, such as the seller, the lender, or a down payment assistance program.

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