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Whether you’re buying a home for the first time, refinancing your current place or purchasing that weekend getaway spot, closing costs can build up quickly – but there are ways to cut them down.
When closing on your home, you’ll likely feel like doing a happy dance and nervously biting your nails at the same time. Like others before you, you’ll gaze at the paperwork and strive to come to terms with the amount of dough you’ll have to fork over in closing costs. And by the end of the process, you’ll have an additional asset – but potentially one less pen because it ran out of ink from all the signatures needed!
We’re here to provide you with helpful steps that can save hard-earned money when it comes time to sign on the dotted line.
Closing costs are fees generated by your lender and other third parties that cover certain expenses associated with your loan, such as underwriting, appraisal and inspection. Costs can vary depending on multiple factors, such as where you live and the mortgage type. They can also come out to as much as 6% of the home price – a significant chunk of change, but one that can shrink if you play your cards right.
Start off by familiarizing yourself with our closing cost calculator, then learn about seven basic ways you can save on your home sweet home.
Key Ways to Lower Home Closing Costs:
While the buyer typically pays most of the closing costs, it never hurts to ask the seller if they’d be willing to help out. Depending on the circumstances of the transaction, the state of the housing market and other factors, they might be open to it. Paid over the asking price? Perhaps they can whip out their wallet. Issues found during the inspection? See if they’ll split the cost of repairs!
Since mortgage interest is calculated daily, if you set your closing date toward the end of the month instead of the beginning, you’ll reduce the number of days that interest accrues before your first mortgage payment (typically the first day of the month). A simple step that can save you serious change!
Another way to save is to ask your bank about any programs they’re part of that might help save you money while closing on your home. From grants to rebates and more, these will help chip away at the overall cost. Some banks might even offer a first-time homebuyer credit.
When it comes to mortgage loans, Gate City Bank is proud to offer that last perk! Reach out to a knowledgeable lender to learn if you qualify for our $500 first-time homebuyer credit.1
Mortgage points (also referred to as “discount points”) are a form of interest you can choose to pay with a fee up front in exchange for a lower interest rate and monthly payments. This is commonly referred to as “buying down” your interest rate, and depending on the state of the housing market, it may or may not be worth considering.
The cost of a single point is 1% of your total mortgage – a considerable amount, especially if you don’t expect to live in your home long enough to enjoy the long-term benefits. Ultimately, feel empowered to sit down with a helpful lender to learn what options are best for you. Long story short, in the event mortgage rates drop in the future, you can always consider refinancing to save on interest.
If you're refinancing, another option might be to ask your lender to roll the closing costs into your loan payments, otherwise known as bundling. Of course, this means that you’re not actually getting rid of those fees but merely spreading them out to give yourself a little breathing room. Depending on your financial situation, this may or may not be the right move.
When it comes to working with third-party vendors to complete the mortgage process, there are certain services you can seek out on your own. While the lender typically chooses the appraiser, for example, there are other vendors you can choose from for other things – and possibly save some money. From title searching to pest inspection and more, you can gather estimates from contractors who perform those same services. Just reference the “services you can shop for” section in your loan paperwork.
Since you typically have to prepay on a portion of homeowner’s insurance upon closing, this is a great time for you to shop around to find the best price and coverage. Remember: the more you save on insurance, the less you’ll have to pay in escrow. And if you’re looking for a great place to start, reach out to one of the helpful advisors at Gate City Insurance Agency! They’d be happy to provide you with a free consultation and quote, as well as answer any questions you may have.
Purchasing a home is already one of the biggest investments you’ll ever make, so if you can save some coin on closing costs, the more power to you! Here’s to cutting costs, creating beautiful memories and loving your home – For a Better Way of Life.®
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1 This $500 credit only applies to first-time homebuyers and primary-residence purchases within 100 miles of a Gate City Bank location. Customers must have a Gate City Bank checking account and at least $500 in a Gate City Bank savings account (to be used for the down payment or closing costs). Other terms, conditions and qualifications may apply. The credit will show up on the mortgage loan at closing. Uffda!
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