What closing costs are negotiable in a mortgage?

Buying a home is an exciting milestone, but the costs involved can be daunting. One often overlooked aspect is closing costs – the fees and expenses you’ll need to pay when finalizing your mortgage. The good news? Some of these costs are negotiable, giving you a chance to save money on your biggest investment.

What are Closing Costs?

Closing costs are the various fees and charges associated with getting a mortgage and transferring ownership of a property. They typically range from 2% to 5% of the home’s purchase price and can include things like:

• Lender fees (origination, underwriting, processing)
• Third-party fees (appraisal, credit report, title search)
• Prepaid costs (property taxes, homeowners insurance)
• Escrow deposits

It’s like paying an entrance fee to get into your new home – a necessary expense, but one you can potentially reduce.

Negotiable Closing Costs

Not all closing costs are set in stone. Here are some common fees that you may be able to negotiate:

Origination Fees: These cover the lender’s administrative costs for processing your loan. Shop around and compare rates, as some lenders may be willing to waive or reduce these fees to win your business.

Discount Points: You can pay these upfront fees to lower your mortgage interest rate. Negotiate the cost of each point, as even a small reduction can save you thousands over the life of your loan.

Title Services: Fees for title search, title insurance, and closing/escrow services can vary widely. Get quotes from multiple providers and ask your lender if they can match or beat the lowest rates.

Home Inspection: While not technically a closing cost, you can often negotiate the price of a home inspection or request that the seller covers part of the cost.

Surprising Insights

1. Lender Credits: Some lenders offer credits to offset closing costs if you opt for a higher interest rate. This can be a smart move if you plan to sell or refinance within a few years.

2. Seller Concessions: In a buyer’s market, you may be able to negotiate for the seller to pay a portion of your closing costs as part of the deal.

3. No-Closing-Cost Mortgages: Some lenders offer mortgages with no upfront closing costs, but they typically charge a higher interest rate or roll the costs into your loan amount.

Remember, knowledge is power when it comes to negotiating closing costs. Don’t be afraid to ask questions, compare offers, and advocate for yourself throughout the process.

Learn More

• Mortgage Points: Upfront fees that can lower your interest rate and long-term costs.
• Escrow Accounts: How these accounts work and why they’re important for homeowners.
• Closing Disclosures: Understanding the key documents and fees at closing.