How to Save at Closing Time
Closing costs can add up quickly when purchasing a property. Before you enter into any deal make sure you know exactly what to expect for costs to close. There are several ways that you can save money at closing. In this article, we will go through some strategies that can help you reduce your closing costs and keep more money in your pocket.
Negotiate with the Seller
One way to save money at closing is to negotiate with the seller. It's not uncommon for sellers to be willing to help pay for some of the closing costs, especially if they're motivated to sell the property quickly. The most common way for sellers to help is by paying a portion of the closing costs, which can include things like title insurance, recording fees, transfer taxes or other related expenses. Make sure you talk about this with your agent when he/she is drafting the Agreement of Sale.
Shop Around for Lenders
Another way to save money at closing is to shop around for lenders. Closing costs can vary significantly between lenders, so it's important to compare quotes from multiple lenders to find the best deal. Be sure to ask about any lender-specific fees, such as origination fees, processing fees, or underwriting fees, as these can add up quickly.
Review the Loan Estimate
The Loan Estimate is a document that lenders are required to provide to borrowers within three business days of applying for a loan. This document provides an estimate of the closing costs associated with the loan. Review the Loan Estimate carefully to ensure that you understand all of the fees and costs associated with the loan. If you have any questions, be sure to ask your lender for clarification.
Consider a No-Cost Mortgage
A no-cost mortgage is a type of mortgage that alters or eliminates many of the traditional closing costs associated with purchasing an investment property. There are two ways lenders can do this. One way is by charging you a higher interest rate to cover the cost of making the loan. The other way is by adding the closing costs to your loan amount. In either case, you will not be paying the closing costs at time of closing which reduces your cash out of pocket expense.
Ask for Discounts
Another way to save money at closing is to ask for discounts. Some lenders, title companies, and other service providers may offer discounts for things like paying in cash, bundling services, or having a good credit score. Be sure to ask about any discounts that may be available to you.
Use a Real Estate Agent
Using a real estate agent can also help you save money at closing. Real estate agents have experience negotiating with lenders and other service providers, and they may be able to help you get better deals on closing costs. Some agents charge additional service fees beyond the standard commission. Every state is different in who generally pays commission. For example one state the buyer may pay their agent’s commission whereas in another state the commission may be paid by the seller. Make sure you inquire with your real estate agent if they charge fees beyond the standard commission as well as who pays the commission.
TITLE FEES
A hold open or binder policy is a discounted title product generally aimed at real estate investors and/or fix and flippers. It is not a title insurance policy, but rather a commitment to issue a title insurance policy when an investor sells a flipped property within a certain amount of time (generally 12-24 months). The binder shields investors, who don’t plan to hold property for the long term, from incurring the full amount of closing costs. There are a few other reasons to use a hold open policy so be sure to ask your title agent if a hold open policy is right for you.
Plan Ahead
Planning ahead is one of the best ways to save money at closing. Take the time to research lenders, service providers, and other related costs before you start the buying process. By being informed and prepared, you'll be better equipped to negotiate with lenders and other service providers, which can help you save money in the long run.
If you are new to investing and want to know learn more about closing costs, book a consultation with me. You can also visit my Title company’s website to learn more.