Among the standard upfront expenses of buying a home that may surprise you are the closing costs. These fees, separate from your down payment, include the cost of services for things like your home appraisal and searches on your home’s title. Average closing cost totals vary by state, and can far exceed $10,000, when including transfer taxes.
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Some closing costs are simply inescapable, and you should talk with your real estate agent and/or escrow company to find out how much you’ll owe. That said, there are some crafty ways to potentially reduce the amount owed in closing costs when buying a home, according to real estate experts.
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Look Into Community Lending Programs at Your Bank
When you’re taking out a mortgage loan, dealing with your bank could become a frequent task and sometimes an irritating one. But banks aren’t necessarily bullies in this case. They may have a community lending program to help you out with your closing costs.
“Check to see if your local bank has a community lending program,” said Rolando Lora, executive VP, chief retail lending officer and director of community lending at Washington Trust. “These are programs that are designed to make homebuying more affordable for buyers who may be short on closing costs. Community lending programs may offer grants or credits that reduce closing costs and do not have to be repaid, or other benefits such as waiving the standard underwriting and processing lender fees.”
Whether you qualify depends on your income level or sometimes the location of the home you’re buying. “For instance, Washington Trust bank in Westerly, Rhode Island, has four unique community lending programs that help eligible borrowers save anywhere from $1,000 to $2,500 on closing costs,” Lora said.
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Explore Different Loan Programs
Some closing costs come down to the type of loan you get.
“Different loan programs can also be either a larger expense or a cheaper entry into home,” said Ralph DiBugnara, founder and president at Home Qualified. “Homes that offer lower down payments like FHA or VA loans, tend to have a higher cost of closing. A larger down payment or a conventional loan program through Fannie Mae or Freddie Mac may offer a larger overall savings.
Roll Closing Costs Into Your Mortgage
This one won’t save you money in the long run, but it will save you money upfront, which could be super helpful if you’re running a bit short on cash. Look to roll closing costs into the mortgage itself.
“Let’s say you have your heart set on a home that has an asking price of $250,000; that would make closing costs on that home $7,500,” Omar Reiner, realtor and president of FL Cash Home Buyers, LLC, told GOBankingRates. “That might be tough to put together in time for closing, so if your lender allows you to roll that $7,500 into the sales price, making your mortgage $257,500. That would add a few dollars to your monthly mortgage payment but give you flexibility with immediate cash needs.”
Pay the Commissions
This one doesn’t sound like it will save you money, but it might save you some: Pay the commissions. This approach could also give you the added bonus of lower taxes later on.
“If the buyer pays for the commissions, the price of the house will be lower and thus less closing costs,” said Jeff Lichtenstein, CEO and broker at Echo Fine Properties. “It will also lower the documentary stamps. This can reduce closing costs by around 7.5%. In addition, the tax base of the house is recorded lower and since many taxing authorities base the taxes on the recording price, it could lower the future taxes by 7.5%.”
First-Time Buyers May Qualify for Big Closing-Cost Grants
First-time homebuyer? You may be able to save big bucks based on that fact alone.
“Many lenders, including Bank of America, offer closing-cost grants worth several thousand dollars to qualified first-time purchasers,” said Mukul Lalchandani, managing broker at Undivided. “Last time I checked, it was a $7,500 credit. It pays to compare programs.”
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This article originally appeared on GOBankingRates.com: 5 Ways To Reduce Closing Costs When Buying a Home
