We get it—buying a home is expensive. A down payment and closing costs add up quickly and can seem a bit overwhelming. After all, closing costs are typically 3 to 6% of the total purchase price of the house. Here are few ways you might be able to save some cash on your closing costs (be sure to ask us if you have any questions so we can help guide you).
1. Close at the End of the Month (Maybe)
You’ll often hear that you can save money on closing costs by closing at the end of the month.
This is because you pay prepaid interest for the days between closing and the end of that month. So if you close on January 20th, you pay interest for the 11 days that are left in the month. You obviously pay less prepaid interest if you close on, say, January 25th.
However, in Oregon, you may not always save money by closing at the end of the month. This is because of pro-rated property taxes that you need to pay back to the seller at closing.
If you’re not sure what will save you most money, just ask us. We’re always happy to answer questions about closing costs.
2. Ask the Seller to Pay Part of Your Closing Costs
This doesn’t usually happen in hot housing markets where inventory is tight (like Portland right now), but you can ask for the seller to pay all or a portion of your closing costs. Most loan programs allow sellers to pay up to 6% of the purchase price.
It’s important to know that seller-paid closing costs cannot be applied to your down payment.
3. Don’t Pay Points
You may have heard that you can pay points at closing to buy down your interest rate. This can be a great idea, but during a time when rates are already historically low, it’s probably not in your best interest to buy down your rate at closing.
4. Shop Around for Homeowners Insurance
Homeowners insurance policies and premiums can vary widely. Make sure you shop around and get quotes for your new home.
And make sure you do your shopping as soon as possible, because you may delay closing if you take too long to make a decision about who you want to use.
5. Review Closing Forms for Red Flags
You’ll receive initial disclosures shortly after you apply for a loan. They’ll give you estimates of the closing costs you’ll be paying. By law, these estimates must be accurate, changing only for variable expenses like prepaid interest and tax changes.
Look for new or added fees on the disclosure forms you receive three business days before closing. If the fees have changed, ask us for an explanation! Most fees can’t change more than a certain percentage between the time you apply for a loan and the time it closes.
Also, if you’ve applied to other lenders, look for junk fees, like warehousing fees or processing fees. These fees usually stick out because they aren’t standard on all disclosure forms. Make sure to ask about them. Here at Team Flanagan we want you to know exactly what you’re paying for, so we’re always happy to answer any questions you have about your loan.
6. Wrap Costs into the Loan
If you’re doing a refinance, closing costs can be financed as part of the loan.
If you’re purchasing a home, you can ask us for a lender credit to help with closing costs in exchange for a higher interest rate on the loan. This lender credit cannot be applied to your down payment, however.
7. Check into Options if You’re a Member of the Military
It depends on what programs we have available at the time, but if you’ve served in the military, ask us what options might help you lower your closing costs. VA loans, for example, limit the closing costs you’re allowed to pay.
Questions About Closing Costs
Have any questions about closing costs? We’ll be happy to answer them and any other questions you have about getting a loan with Guild Mortgage. We want your loan to work for you!