What are Closing Costs?
If you’re planning to purchase a home, it’s important to consider the closing costs associated with the transaction. More than likely, you will have to shell out a little hard-earned cash in addition to your down payment in order to get your piece of the American pie. It’s not all bad news though. While you probably won’t be able to completely avoid closing costs, you may be able to reduce them to a manageable number.
Closing costs defined
Investopedia.com defines closing costs as “expenses over and above the price of the property in a real estate transaction.” These costs are payable at the time of closing, which is the point in time when the seller transfers the title of the property to the buyer.
What, exactly, is included in the closing costs?
Some of the costs typically included are the loan origination fee, title insurance and searches, fees for appraisals and surveys, discount points, credit report fees, deed recording fees, courier expenses, interest, and taxes. Additionally, prepaid expenses such as homeowner’s insurance premiums and property taxes can also be included. The mortgage lender is required to supply a “good faith” estimate of all closing costs within three days of receiving the buyer’s home loan application.
What are some ways to reduce closing costs?
The more you are required to pay at closing, the bigger the impact on your bank account. There are several ways to reduce this cash outlay, and when facing all the expenses associated with moving into and getting comfortable in a new home, every dollar saved is a big deal.
Close at the end of the month
The closer to the last day of the month you can close on your new property, the less you will have to pay in interest. This adds up to some savings on your closing statement.
Get the seller to pay part of your costs
Negotiate some of the closing costs into your contract with the seller – In other words, the seller pays a certain amount towards the buyer’s costs. This happens much more frequently than you may think.
Finance the closing costs
Adding the costs to your mortgage can result in a higher interest rate and, obviously, a higher monthly mortgage payment. But if you’re tight on cash or have your assets otherwise tied up, this can be a valid consideration.
Look for special programs
If you are a veteran, active duty military, teacher, or union member, you may have access to special programs such as discounts and rebates to assist you with closing costs. A little research into such programs can go a long way.
Every lender is different, and fees can vary. The same goes for title companies. It also pays to compare providers of homeowner’s insurance. Taking the time to comparison shop can add up to some pretty sizable savings in the long run.
Looking for creative ways to reduce your mortgage closing costs? Contact Torrance mortgage lender Shawn Carvin today for a free consultation. Shawn is a licensed California mortgage professional with nearly 30 years experience in the financial services industry, half of that focused on mortgage lending. Shawn works with clients throughout the greater Los Angeles area including Torrance, the Palos Verdes Peninsula, the Beach Cities, other South Bay communities, and beyond.