How to Reduce Closing Costs
Purchasing a new home may be the largest financial transaction you ever make, so it’s important to consider all the potential expenses and how to mitigate them so that you’re getting the best deal possible. One of the easiest ways to reduce your overall real estate transaction costs is to work on lowering your closing costs.
What are Closing Costs?
“Closing costs” is a blanket term that covers a variety of different fees involved in a real estate transaction. Closing costs will be different for each real estate transaction but usually range from 3% to 6% of the total purchase price. The exact fees and charges that apply to your situation won’t apply to everyone. Closing costs for most real estate purchases contain some combination of the following items and services:
- Application fee
- Attorney fee
- Closing fee
- Courier fee
- Credit report fee
- Escrow deposit
- Flood determination and monitoring fees
- Homeowner’s insurance prepayment
- Title insurance (lender and owner)
- Inspections (lead paint, pests, plumbing, electrical, etc.)
- Discount points
- Origination fee
- Prepaid daily interest charges
- Private mortgage insurance (PMI)
- Appraisal fee
- Property tax
- Real estate commissions
- Rate lock fees
- Recording fee
- Survey fee
- Tax monitoring fees
- Tax status search fee
- Title search fee
- Transfer tax
- Underwriting fees
- Homeowner Association (HOA) fees
There can be many other fees included in the closing costs other than those listed. Certain types of mortgage loans require other closing costs, such as mortgage insurance premiums for FHA loans or funding fees for VA loans.
How Can I Lower My Closing Costs?
While some fees that are included in closing costs are not negotiable, such as taxes, there are many that can be lowered by educating yourself prior to purchasing a property. Some of the best ways to reduce closing costs here in Florida include:
Compare Lender Estimates
When you apply for a mortgage loan through a lender, they are required to provide you with an estimate of the loan offer (or denial) within three days of you submitting the loan application. This loan estimate will include the total amount financed, interest rates, the term of the loan, and the amount required for closing. By applying with different lenders and comparing the loan estimates you receive from each of them, you can choose a lender with the most favorable terms.
Another part of comparing lender estimates is determining exactly what fees you are being charged and then trying to negotiate for the reduction or elimination of fees you see as unnecessary or frivolous. Some lenders will give a detailed estimate that spells out where every dollar of the fees they charge goes, while others will just provide a total of lender fees. It is your job as the buyer to investigate all the lender fees.
Shop Around for Services
Just like you should shop around for the best lender, you should also shop around for the best professionals to handle the various parts of the real estate purchase process. Compare quotes from inspectors, surveyors, title search companies, and more to get the best deals and bring your closing costs down.
Save Time and Money on Closing with Benefit Title Services in South Tampa
When you’re ready to purchase a new property but don’t want to leave thousands on the table in unnecessary closing costs, consult with the real estate transaction experts at Benefit Title Services. We can help you understand and compare lender estimates, identify costs you can eliminate or negotiate, and ensure that there are absolutely no title issues with the property you are purchasing before you sign on the dotted line. Contact us online to save money on your closing today!