Save Thousands at Closing

Buying a home is an adventure, but an expensive one. The process of obtaining a home loan can be confusing, especially when it comes to closing costs — a lengthy list of fees charged by the lender and other vendors to facilitate the sale of the home. Understanding these fees, and whether or not you’re being overcharged, can be overwhelming. Here are six ways to reduce your closing costs and potentially save thousands of dollars.

1. Shop Multiple Lenders

Most buyers know to shop around for the best mortgage rate, but few compare closing costs across lenders — which can vary significantly. Get Loan Estimates from at least three lenders and compare not just the interest rate but all the fees. Even small differences in origination fees, underwriting fees, and points can add up to thousands of dollars.

2. Negotiate with the Seller

In many transactions, buyers can ask sellers to contribute to closing costs as part of the offer. This is called a “seller concession” or “seller credit.” In a buyer’s market, sellers may be more willing to accommodate this. Even in competitive markets, it’s often worth asking — the worst they can say is no.

3. Look Into Down Payment Assistance Programs

Many state and local programs that provide down payment assistance also cover closing costs. California’s CalHFA programs, for example, offer assistance that can be used for closing costs. Ask your lender and your Avonya agent about programs you may qualify for.

4. Close at the End of the Month

At closing, you pay prepaid interest from the closing date to the end of the month. Closing at the end of the month minimizes this prepaid interest charge. On a $500,000 loan at 7%, this difference can amount to several hundred dollars.

5. Review the Closing Disclosure Carefully

You will receive your Closing Disclosure three business days before closing. Review it carefully and compare it to the Loan Estimate you received at the start of the process. Flag any fees that have increased or that you don’t recognize. Some fees are fixed and some can change — knowing the difference helps you identify potential errors.

6. Ask About No-Closing-Cost Options

Some lenders offer no-closing-cost mortgages where the fees are rolled into a slightly higher interest rate. Depending on how long you plan to keep the loan, this can make financial sense. Run the numbers with your lender to compare.