In case you were not already aware, closing costs are the expenses that buyers and sellers normally incur when completing a real estate transaction. Typically, closing costs include loan origination fees, appraisal fees, title searches, title insurance, discount points, surveys, taxes, deed-recording fees, and credit report charges.
However, did you know that there are some quick and efficient ways to reduce most of these fees? Let us discover 3 useful strategies that can help you to lower your closing costs.
Compare Loan Estimate Forms
In most cases, the first time you will see your itemized closing costs will be in a Loan Estimate form that is provided by a lender once you apply for a mortgage. You might also be interested to learn that some lenders will give you a Loan Estimate prior to applying for a loan. This particular form is slightly different to the final bill otherwise known as a Closing Disclosure form that you will receive approximately 3 days before closing.
Put simply, once you have a Loan Estimate, you can compare the total costs from a few different companies while at the same time exploring any specific fees that you might feel need adjusting. Just remember, your Loan Estimate is a legally binding document that is different to the closing costs worksheets, or fee itemization lists that some lenders offer, and so it is worth making sure you have the necessary paperwork before starting your search. Consequently, if you are investing in property in Minneapolis for example, you can find further information about the Loan Estimate documentation and learn more about the closing costs in the Twin Cities over on the Grumdahl Group website.
Research Key Savings Areas
Secondly, there are several services involved in your closing costs that can often be found at a more competitive price. As a golden rule, if you are up against the clock, it is often the pricier services where the largest savings lie. Essentially, fees for home inspections, surveys, title searches, title insurance binders, lender’s title policies, and settlement agents can all be significantly reduced by shopping around. Accordingly, when negotiating these values, it is crucial that you do not get lost in the details and always return to the potential impact on your overall closing costs.
Not sure where to begin? Comparison shopping for title insurance and settlement services can often lead to the biggest discounts. Combining these savings can dramatically bring down your overall costs. Comparatively, if you have more time, although seeking out more affordable pest inspectors, surveyors and other services might not lead to any huge price differences, it is still well worth identifying as many other potential areas for reductions and costs savings as possible. In short, comparing fees from lenders and third-party services in this way can help you to save a considerable amount of money.
Schedule Closing at the End of the Month
A surprising number of new homeowners do not realize that opting for a closing date near the end of the month can significantly reduce any prepaid daily interest charges. For example, if you close at the beginning of the month on October 6, you will be required to pay the per diem interest from the 5th until the 30th. However, if you close on the 29th, you will only have to pay for one day of interest.
Most lenders will be prepared to run this scenario to find out how much money you might be able to save. That being said, if you were curious to work out your potential savings, you can multiply your loan amount by your interest rate to find your annual interest charge. You can then divide that number by 365 to see the daily interest charge. From there, simply multiply this figure by the days left in the month to determine your total savings.
Ultimately, it is important to remember that almost all closing costs are negotiable. Above all, by asking the right questions, doing plenty of research, and comparing fees and service charges from more than one provider, you can substantially reduce your closing costs.
Looking for more real estate resources? Take a look at this essential guide to buying and selling real estate.