How to Save On Mortgage Closing Costs

For any first time home buy, the hefty closing cost maybe a surprise. It ranges anywhere from 3% to 6% of the purchase price, that amount coupled with down payment required at the closing table will surely be a huge burden for most buyers.

But remember, you have the following ways to save on your closing costs.

Difficulty: Moderately Easy

Instructions

1. If you are short on cash, you can shop around to see which mortgage lender offers no-cost financing.
   
   Obviously no-cost doesn't mean the lender will eat your cost. It simply means your closing costs will be rolled into your loan amount and making the upfront cost becomes a longer term payment, through either higher interest rate or more principal amount.

2. Contact your seller to see if they are willing to pay partial or full closing costs.
   
   This is a buyer's market, it doesn't hurt to ask the seller for this option. Desperate home sellers will definitely entertain any options that could help them sell their houses.
   
   Note that such seller subsidy is subject to some regulation limitations. Fannie Mae and Freddie Mac only allow sellers to subsidize up to 6% of the purchasing price, so are FHA loans.

3. If your cash situation enables you to put down 20% down payment, make sure you do so in order to avoid the monthly PMI which could cost anywhere between 0.5% and 1.5% of your loan amount each year.

4. Finally, negotiate with your lender to get rid of or pay less on some garbage closing costs. For example, 80% of title insurance premium goes towards commission, make sure you negotiate hard or shop around with a title insurance policy.

[nancycarol]

on 8/27/2009 *5 Nice article...though I'm not in the market, I know others who are. Thanks for How To Save On Mortgage Closing Costs.

[chevalita]

on 8/27/2009 Should the first sentence be "home buy" or "home buyer"?

Nice little article. I'm currently in the learn-everything-I-can phase of home buying. 5*