Four Steps to Lower Closing Costs When Buying A Home

Everyone wants to pay lower closing costs when they buy their home. By taking these four steps, you will be able to minimize the amount of the check you need to write when you buy your home.

1. Shop Around for your mortgage and Attorney/title services. Not all mortgage lenders have the same rates or fees. When shopping for a purchase mortgage loan with the lowest mortgage rate, be sure to also compare application, processing and c losing fees. An interest rate that is one eighth of a percent lower than competitors is not really a deal if it comes with $2,000 more in fees than the other lenders. In addition, be sure to shop for attorney and title service fees as well by making sure to ask what these fees will be before hiring them for your closing.
2. Choose a mortgage loan with zero points. One point equals one percent of your loan amount. Each point you pay is supposed to lower your interest rate by about one quarter percent for fixed rate mortgage. For many first time home buyers, they will be moving within five to seven years into a new home, so paying more points up front to lower your interest rate is not such a wise financial move. Instead, choose the rate option with zero points and save thousands of dollars in closing costs.
3. Close at the end of the month. Mortgage loans are set up to be due on the first of the month. If you close on the tenth of the month, for example, your lender will want you to pay the interest on your loan to cover from your closing date until the end of the month. In many cases, this can add hundreds if not thousands to the amount of money you have to bring to your closing. By scheduling your closing at the end of the month, you do not have to pay this pre-paid interest charge.
4. And the best step... Have the seller pay your closing costs! Todays real estate market is definitely a buyers market for the foreseeable future. In addition to offering a lower price when you bid on a home, request that the seller pay your closing costs. Mortgage lenders allow sellers to pay between 3% and 6% of a home buyers closing costs. In many cases, sellers are permitted to pay enough to cover all of a borrowers closing costs. Even if you can and do arrange this, it is still important to follow steps one through three because even though the seller is technically paying your costs, any money you can save can go toward cutting your purchase price even further.

Even if you are not able to have the seller pay your closing costs, following steps one, two and three will help cut your closing costs by thousands of dollars. For many home buyers with limited funds, these savings could spell the difference between becoming a home owner now or having to wait for years or more.

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