Ways to Reduce Closing Costs

We’ve looked at five ways to speed up real estate closings and now, let’s delve into how to reduce those closing costs. Generally, closing costs range between 3 percent and 6 percent of the sale price of a home. That equals $6,000 to $12,000 on a $200,000 house and $10,500 to $21,000 on a $350,000 house. Needless to say, this isn’t an inexpensive cost to incur. But fortunately, there are effective ways to reduce closing costs.

Ways to Reduce Closing Costs

So, why is there such a broad range? Well, the answer doesn’t lie with your attorney’s fee, and it isn’t the title insurance company who benefits most, nor is it your lender. If not any of these, then who is getting the lion’s share of all that money? Unsurprisingly, it’s the government — your city, county, and state all account for a huge chunk of your closing costs. But if this is the case, then just how do you reduce your closing costs?

“Unless you’re Kylie Jenner, it takes a long time to save for a down payment on a house. The rest of us sacrifice our gourmet coffee for the lukewarm in-office drip in the hope that setting aside a few dollars a day will magically compound into enough to buy our piece of the American Dream. And just when we think we have the necessary funds to make even the minimum 3% down payment, we’re slapped with another round of expenses: closing costs.” —Realtor.com

First you need to start with avoiding the most common home closing hurdles because these will cost you time, money, and effort. The good news is, you can effectively lower the amount you pay to settle a residential real estate transaction. By the way, some of these also apply to homeowners who are refinancing because refinancing isn’t a restructuring or modification of a mortgage, it’s an entirely new home loan. Here are the best ways to reduce closing costs:

  • Negotiate fees down or out. The truth about closing cost fees, is many are negotiable, though don’t expect your lender or the title company to tell you about that. So many of the line item fees aren’t set in stone and you can negotiate them down or even have them completely removed. There are many garbage fees packed into closing costs, so be sure to ask what you can reduce or eliminate.
  • Close at the end of the month. This is an easy way to reduce your closing costs but it might cause problems with your timeline schedule. If you close at the end of the month, on the 29th or the 30th, you’ll only pay one day of per diem interest. Conversely, if you close at the beginning of the month, on the 3rd or the 5th, you’ll pay per diem interest for every day for the rest of the month.
  • Request the seller pay. The majority of loans allow sellers to contribute or pay the closing costs for up to 6 percent of the sale price. It’s generally a closing cost credit and it’s a great way to spend less out-of-pocket come settlement day. It’s also tax-deductible for the seller, providing a bit of incentive. However, if it’s a hot real estate market with little active inventory, this won’t likely be an option.
  • Wrap closing costs into the mortgage. You can opt to roll your closing costs into your home loan. While this will add to your mortgage repayment, it’s one way to walk away from the closing table without having your pockets picked empty.
  • Inquire about loyalty programs. Some banks offer discounts on closing costs for their account holders who take out a home loan with them. It might lower the origination fees or other discounts and it’s definitely something to investigate.

If you are considering buying a home in Orlando, contact us for the latest market information. We’ll also provide you with the right advice to find a house quickly and for the best price.