Whether you’re buying a house or refinancing your existing one, if a mortgage is involved, you’re going to pay closing costs.
Generally speaking, these usually clock in somewhere between 2% to 5% of the loan amount — so about $6,000 to $15,000 on a $300,000 loan.
It probably sounds like a lot — especially considering the down payment you’ll also owe if buying. Fortunately, there are several ways you can lower your closing costs and make buying or refinancing more affordable.
Want to reduce your upfront costs of buying a house or refinancing? Here are five ways to do it:
1. Ask the seller to contribute.
If you’re buying a house, you can ask for what are called “seller concessions.” These are just funds that the seller contributes (out of the sale proceeds) to offset your closing costs.
Not every seller will agree to these — especially if they have dozens of buyers knocking at their door — but in a tight market, they might be more willing. Ask your real estate agent if this is a good move in your situation.
2. Shop around.
There are so many services you can shop around for when getting a mortgage, and doing so? That will ensure you get the best deal at closing.
You can shop around for your mortgage lender, your title company, your surveyor, and anything else listed on the “Services You Can Shop For” section of your Loan Estimate (Section C on Page 2). Comparing providers not involved in your mortgage, like your home inspector, your home insurer, or your real estate agent, can also help you save money in the long haul.
3. Roll them into your loan balance.
Another option is to roll your closing costs into your loan balance and pay them off over time.
This isn’t offered by all lenders and is more common when refinancing than when buying a house, but it can be a good way to lower your upfront costs if you really need it. Just remember: A higher loan balance means a bigger monthly payment and more paid in long-term interest.
4. Skip the points.
Points can help you lower your interest rate, but they also come at a cost — sometimes thousands and thousands of dollars. If you’re really struggling to come up with the upfront cash to buy or refinance a house, you might consider skipping these points and saving the money instead.
After all, mortgage rates are already pretty low these days. Plus, you can always refinance down the road. (Just make sure you talk to your loan officer before doing this. They can walk you through the long-term costs of a higher rate and no points).
5. Choose an end-of-month closing date.
Your closing costs include something called pre-paid interest — mortgage interest you’ll owe your lender between closing day and the day your first payment is due. If you close on the first of April, for example, you’d owe 29 days of pre-paid interest. Depending on your rate, that could amount to a hefty sum, especially on a large balance.
If you swapped your closing day for one closer to the end of the month, you could shrink those pre-paid costs significantly.
Get personalized help
Are you looking for ways to lower the costs of your home purchase or refinance? A good loan officer can help. Get in touch with Premier Nationwide Lending today for personalized guidance.
Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 6201 West Plano Parkway, Suite 100, Plano, TX 75093 | NTFN NMLS 75333.