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Whether you’re buying a home or refinancing your mortgage, closing costs are part of the deal. But the good news is that just about everything is negotiable.
Even though there might be some limitations, negotiating closing costs can be one way to save money when you buy or refinance a home.
Here are six ways to negotiate your closing costs:
- Compare loan estimate forms between lenders
- Ask about lender fees
- Check for lender rebates
- Shop around for service providers
- Get the seller to chip in
- Sign loan papers at the end of the month
1. Compare loan estimate forms between lenders
When negotiating closing costs, one of your best tools for leverage is the loan estimate form. The loan estimate itemizes all of the fees.
While you’re shopping for loans, you can get information from lenders by using loan estimate forms. Lenders are required to provide you with this form within three days of when you apply for a home loan or home refinance.
By comparing loan estimate forms, you can:
- See the details of all the fees, so you know what to expect
- Compare estimated costs from multiple lenders
- Negotiate closing costs with the lender of your choice
Credible can help you compare estimated closing costs with our partner lenders in the table below by filling out a single prequalification form, so you don’t have to bother filling out a form for each lender.1
Find Out: How to Get a Mortgage Pre-Approval
2. Ask about lender fees
If you want a better deal when you take out a mortgage or refinance your mortgage, it’s a good idea to ask a few questions about the specific fees the lender charges — and why they charge these fees.
If you have good credit, for example, you might be able to get a lender to drop a fee in order to secure your business.
3. Check for lender rebates
Some lenders will offer rebates to existing customers. This can be one way to save, especially when negotiating closing costs on a refinance and other refinancing fees.
Sometimes banks will offer a loyalty discount if you already have other accounts or loans with them.
4. Shop around for service providers
On the second page of your loan estimate, there’s a list of mortgage closing costs you can’t shop around for and those you can save money on.
If you shop around for service providers as part of negotiating closing costs, you can save some money in the long run.
- Pest inspection — average cost $100: Look over the home for evidence of pest damage, like that done by termites, ants, or rodents.
- Survey fee — average cost $504: Determines the exact property boundaries.
- Title fees — average cost varies, but typically more than $2,000: Includes the fees for searching the title to make sure the seller has all rights to the property, as well as insurance policy fees (in case something goes wrong) and settlement fees to pass the title.
5. Get the seller to chip in
You can also negotiate closing costs with the seller. Usually, the seller covers the real estate agent commissions and might even pay other closing costs.
Ask the seller to get involved in a way that saves you money when you buy a house. They might cover the cost of the appraisal and some of the inspections.
A buyer’s agent is required by regulation to be on your side and can help you with negotiating closing costs in a way that saves you money in the long run.
Learn: How to Save for a House
6. Sign loan papers at the end of the month
It sounds a little strange, but you can actually save money by signing your loan papers near the end of the month. This is because you’ll be charged a daily interest rate (called a “per diem”) for the time between closing and your first loan pay period.
Basically, your lender will figure out what the daily interest charge would be on your loan, and then levy that against you for each day between the loan closing and the start of your first pay period. If you can arrange your loan closing at a time closer to your first payment, you’ll save money on the per diem.
See: Mortgage Origination Fees: How to Spot and Avoid Them
No-closing-cost mortgages can save you money upfront — but cost more in the long run
Now that you know how to save by negotiating closing costs, there are a couple more ways that don’t involve negotiating:
- No-closing-cost mortgages: First, it’s important to understand what a no-closing-cost mortgage or no-closing-cost refinance is. With a no-closing-cost loan, you’ll still pay the closing costs, but in most cases, the costs are simply rolled into the overall mortgage. The costs will be part of the total loan amount and you’ll pay interest on them, or the lender will charge you a higher interest rate to make up for the closing costs, which could lead to higher costs over the life of the loan. So weigh your options before deciding if a no-closing-cost mortgage or refinance is right for you.
- Mortgage points: Another way to save is to consider paying mortgage points. Mortgage points are each equal to 1% of your loan amount and when paid upfront they directly reduce your interest rate. With the money you save on other closing costs, you might be able to put more toward points, which lower your mortgage rate and can lead to bigger long-term savings on interest.
Do your homework and figure out the best way to go about negotiating closing costs on your mortgage. You might also consider a no-closing cost mortgage or paying mortgage points as one of your options. But with a little due diligence, you could potentially save thousands of dollars.
Luckily, you can use Credible to help you compare lenders and their fees in just minutes.
1Note: Credible does not issue an official loan estimate in connection with prequalification.
