5 ways to reduce the cost of closing a mortgage loan

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You don’t have to agree that it will cost a fortune to close.

Closing costs can be very expensive when buying a home.

In fact, according to research by The Ascent, you usually pay from 2% to 5% of the mortgage amount when closing costs… And in 2020, the average closing costs were actually $ 5,749. This is a lot of money on top of other costs associated with becoming a homeowner.

The good news is that there are ways to cut those upfront costs. Here are five tricks you can try to keep more money in your pocket when you have mortgage loan

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1. Look carefully for a lender

Some lenders charge a higher commission for a loan than others, and some do not charge this commission at all.

You should get quotes from several mortgage lenders. When you do, don’t just look at the interest rate. Look at both mortgage rate as well as fees – and find a lender who won’t charge you a fortune in advance or over time.

2. Find out if payment negotiation is possible.

In some cases, mortgage lenders may be willing to work with you and negotiate royalties to take over your business.

Take a close look at all fees and see if the lender is willing to cut costs or forego any of them. There is a lot of competition among mortgage lenders these days, so it never hurts to ask.

3. Agree with sellers to cover some of your expenses.

Sellers can sometimes provide a final value credit, which means the seller will refund you at close to cover some of your upfront payments.

You will need to discuss this with the seller as part of your sales contract when you make an offer. The seller may be reluctant to do this in a competitive market if he has several interested buyers. Lenders also usually have limits on the amount of the seller’s credit.

However, if you are really worried about the money to cover the closing costs, you can offer this as an option when making an offer to buy and see if any sellers bite.

4. Buy a less expensive home.

The closing price can be influenced by the price of the house. Title insurance fees, appraisal and survey costs, transfer taxes, and a host of other fees can be more expensive for higher priced homes.

Choosing a cheaper home will not only cut some of these costs, but you will also be able to contribute less money as a down payment. In this case, you may have more money left to cover the closing fees.

5. Strategically time your closure.

Closing costs typically include prepaid daily interest to cover the interest expense that will be incurred on the loan between the closure of the home and the date of the first payment.

If you strategically plan to buy before the end of the month, you can minimize the amount of prepaid interest you owe, which will reduce the commission you owe.

Completing one or all of these five steps can significantly affect the amount you have to pay to close your home. However, remember that the final costs are just the beginning of the costs you will incur when you become a homeowner. If you are struggling to find the means to pay them off, ask yourself, financially ready to buy before making a home purchase

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