When you apply for a mortgage, you need to be prepared for the closing costs that you will incur at the time of the closing when you take possession of the property that you're buying. Especially for first-time buyers, sometimes the closing costs come as a surprise and catch buyers unaware. Here are a few things that you should know about the closing costs and ways that you can help to reduce what you pay at the closing.
What Do Closing Costs Cover?
Closing costs are costs paid to the mortgage company upon closing the loan for your home. They are typically intended to cover things like property insurance, tax deposits, origination fees, and even the title fees. You should get a closing fee schedule from your lender before you go to the closing so that you can be prepared and you'll know how much you are expected to pay when you close your loan.
How Can You Reduce Your Closing Costs?
While you can't typically actually reduce the amount that your mortgage company requires in closing costs, you may be able to reduce how much of those costs you have to pay out of pocket.
For example, you could negotiate with the seller for them to pay a portion of the closing costs for you as part of the deal. This is often used as an alternative to fixing a problem that's identified in the home inspection. If you're willing to fix the issue yourself and don't want to reduce the purchase price, you can get the seller to offset your closing costs as compensation.
Talk to your lender about anything they offer to help offset your closing costs as well. You may be able to get an offset as part of your loan. Sometimes, the lender will roll the closing costs into the mortgage. In other cases, you can have the closing costs offset by a higher mortgage interest rate. You'll have to ask your lender about any closing cost relief programs that they offer, though. They don't typically volunteer these solutions.
Finally, you can even ask your real estate agent about a percentage credit on their commission that will help to offset your closing costs. They may reduce their commission by a bit in an effort to provide you with money to offset those closing costs. While this isn't a common solution, real estate agents that are eager for your business may be willing to consider it.
For more information, contact a home mortgage loan program today.