Closing costs are mandatory fees that a home buyer and seller will pay when finalizing a purchase of a home. Usually, these fees can range between 2% to 7% of the total price of the home. That means that if you were to purchase a home that costs $250,000, you would have to pay between $5,000 and $17,500 in closing costs. That’s a pretty wide range; one that may be intimidating to prospective home buyers and sellers. Rest assured, there are ways to lower these fees. Here are a few tips for reducing closing costs:
Bank Loyalty Programs
If you plan on using your bank to finance the purchase of the home, you may qualify for reduced origination fees as part of a loyalty program. Check with your bank to see if this is possible, as it could potentially be an excellent cost-saving initiative.
Schedule the Closing for the End of the Month
An easy way to lower your closing costs is to schedule your closing for the end of the month. How does this help? Well, it eliminates the need to pay the per diem interest for more than a few days. To illustrate, if you closed your home on October 3rd, you would have to pay this interest until the end of the month. However, if you closed on October 30, you would only have to pay this interest for one day.
Convince the Seller to Contribute More
Both the seller and the buyer of a home will have to pay for the closing costs. The buyer, as you might expect, will pay for a majority of these costs. Yet, a large number of loans permit sellers to contribute more – up to approximately 6% of the sale price – towards the closing costs. The only issue is that it could be hard to convince the seller to do so. A good argument for the buyer is that this expense will be tax-deductible for the seller.
Use a Loan
Rather than paying for the closing costs with your own money, see if you can borrow money through the same loan you are using to pay for the home itself. This is a good option for those who do not have sufficient money saved up. While it doesn’t lower the amount you have to pay overall (in fact, lenders usually charge more for this), it does reduce the amount of money you will pay upfront.
Lakeside Title Is Here to Serve You!
Lakeside Title provides title insurance and numerous title-related services, all while making sure your transactions and funds are protected and secure. Our processes streamline residential and commercial real estate transactions for lenders, realtors, buyers, and sellers. To learn more, give us a call at 410-992-1070. We look forward to the chance to serve you!