Home > Mortgages > 5 Ways to Save on Closing Costs

Comments 0 Comments

When you are purchasing a property, there are administrative costs that must be covered before you can become the owner. These are known as closing costs and include things like application, loan origination, appraisal, home inspection, credit report, attorney, appraisal and survey fees. Most of the time the homebuyer pays these.

The typical closing costs are 2% to 5% of the price of the home. That can be a large difference. On a $350,000 home that is the difference between $7,000 and $17,500. To find out what your closing costs will be you can use an online calculator. But these payments are often a key point of negotiation and the fees will vary by lender, so there are plenty of things you can do to save money on closing costs. Here are some tips.

1. Shop Around

Mortgage rates are not the only costs you need to search around for when buying a home. It’s a good idea to get quotes from several third-party services for things like home inspections, surveys, attorneys and title insurance. Mortgage lenders will include a fee for these services on the good faith estimate, but you can ask for the opportunity to find cheaper options. This can be a great way to save money.

2. Know Your Locale

Location is very important in terms of the closing costs associated with your loan. As mentioned above, the amount you will be expected to pay varies greatly. While some may pay around 2% to 3% of a home’s price, some high-tax areas of the country carry closing costs around 5% or 6%. Different states have very different closing costs — some even carrying a flat fee for title insurance. This is why it can be helpful to ask around in your community or try an online tool to estimate closing costs instead of just assuming a number.

3. Negotiate with the Seller

Take notice of cost estimates and work toward the best deal you can manage. The payment of any and all closing costs should be an important negotiation point between buyer and seller from the start. Depending on market conditions and the seller’s motivation or timetable, you may be able to arrange that the seller pays some or all of these fees.

4. Time the Closing Well

If you close toward the end of the month, you can avoid prepaid interest charges. Your lender assesses charges to cover the time between the settlement date and the end of the month to compensate the lender before you will be paying the “full” interest and principal payment the following month. Whether substantial or nominal, this cost can be significantly reduced by planning ahead and scheduling your closing toward the end of the month.

5. Perform a Final Check

It’s important to review closing cost forms carefully. If the fees have changed from the good faith estimate to the official documents that arrive three business days before your closing, ask your lender for an explanation. If you notice new or significantly higher closing costs, it’s a good idea to investigate and consult with a real estate attorney about your options.

Don’t get intimidated if this is a new process — with enough information and negotiation skills on your side, it can be possible to cut back on closing costs. Even taking into account these money-saving tactics, it’s important to include closing costs into your calculation of how much house you can afford.

More on Mortgages and Homebuying:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team