I’m a mortgage expert – here are three ways to reduce closing costs by $1,000s when you buy a home

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Heavy closing costs can delay taking out a loan for a new home, but there are some ways to reduce them.

Average interest rate fixed for 30 years in the week ending 1st April mortgage increased from 4.80% to 4.90%.

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Paul W. Thompson, Guild Mortgage’s senior loan officer, pictured with his wife, explains how to reduce closing costscredit: Paul W Thompson

During the same period, mortgage applications declined by 6% compared to the previous week, according to the Mortgage Bankers Association.

The result of the recent rise in mortgage rates war in ukraine, rising oil prices, high inflation And this Federal Reserve Hiking Rates,

To help keep home loan signing costs down, The Sun spoke with Paul Thompson, senior loan officer at Guild Mortgage.

They disclose what closing costs are and how you can deduct your bill.

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What are closing costs?

Anytime you sign for a home loan — whether it’s buying a new home or refinancing an existing loan — you have to pay closing costs.

These costs are fees paid at the end of a real estate transaction, and they are divided into the following categories:

  • origination fee
  • Services you can’t purchase (such as credit report fees and flood certification)
  • Services you can shop for (such as lender title insurance fees)

Although closing costs vary depending on the loan amount, mortgage type, and region of the country in which you live, “there are some”. [fees] Those are certain,” Mr Thompson told The Sun.

Knowing some of these fixed charges can help prepare you financially for closing the home.

You will find one of these fixed charges under the category “Origin Fee”.

These are called junk fees — also known as lender administration fees.

Mr Thompson said: “Junk fees typically add up to about $1,500.”

They typically include credit report fees, underwriting fees, and flood certification.

An escrow settlement is another fixed fee, and can be found under the category “Services you may purchase”.

Escrow settlement varies slightly on the size of the loan, but Mr. Thompson found the minimum escrow settlement fee to be around $700.

Since most fees are fixed, it can be difficult to pin down the money you’ll spend on closing, but Mr. Thompson shares a few secrets.

1. Ask the Seller to Cover Your Closing Costs

Mr Thompson said: “The best way to reduce your closing costs is to ask the seller to pay for them.”

This can be negotiated when you are offering a price on a home.

However, there are some strategies you can use to ensure that the seller will pay for them.

The first strategy is to offer the seller an expedited closing in exchange for payment of closing concessions.

This turns out to be a successful strategy, because most of the time, a seller wants the home buying process to be over.

You can prepare yourself for a speedy closing by getting a pre-approval and having the cash to cover at least some of the closing costs yourself, such as a home inspection.

Another tactic for a seller to pay their closing costs is not to make large demands like renovations.

As mentioned, a seller does not want the home buying process to be lengthy and renovation will do.

If the seller is not ready to pay all the closing costs, you can ask them to pay a partial amount.

2. Lower Your Mortgage Discount Points

Many times people will spend more to get lower interest rate. mortgage discount points,

However, Mr. Thompson explained that it is not always the smart thing to do for a few reasons.

Typically, the interest rate affects your monthly payment by only a few dollars, and most people refinance in about six years.

“So, unless you’re going to see savings in six years, it’s not worth it,” Mr. Thompson said.

Plus, the fewer discount points you use, the better chance you have of getting the lender’s credit, which is a credit that lowers your payments at closing.

3. Ask Your Lender About Incentives

The last way to reduce your closing costs is to ask your lender about a signing incentive.

For example, “a lender might say they will cover your appraisal fee,” Mr. Thompson said.

However, these incentives are not given regularly and are offered on a case-by-case basis.

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