Mastering the Skill of Negotiation for Closing Costs
When it comes to purchasing a home, there are many expenses that need to be considered, from the down payment to the monthly mortgage payments. But there is one expense that can often get overlooked or underestimated – closing costs. These costs are the fees associated with finalizing the sale of a property and can include things like attorney fees, title insurance, and inspection fees. A recent study by ClosingCorp found that closing costs can range from 2% to 5% of the total loan amount. That’s why mastering the skill of negotiation for closing costs can save homebuyers thousands of dollars in the long run. In this article, we’ll discuss strategies for negotiating closing costs to help you become a savvy homebuyer.
Understanding Closing Costs
Before diving into negotiation tips, it’s important to have a clear understanding of what closing costs actually are. As mentioned, these are the fees associated with finalizing the purchase of a home. They are paid at the time of closing and cover services such as property appraisals, credit report fees, and document preparation. Closing costs can vary based on the location of the property, the lender, and the type of loan. It’s crucial to get an estimate of closing costs from your lender early on in the home buying process so you can budget accordingly.
Know What You Can Negotiate
Many home buyers assume that closing costs are non-negotiable, but that simply isn’t true. In fact, some closing costs are completely negotiable, while others may have some wiggle room. For example, lender fees, title insurance, and inspection fees are often negotiable, while other costs, such as taxes and government fees, are typically non-negotiable.
Shop Around for Lenders
When comparing closing costs, it’s important to shop around for different lenders. Different lenders may have different fees and rates, so getting multiple quotes could potentially save you thousands of dollars. Make sure to review each lender’s fees and ask questions if anything seems unclear or unnecessarily high. You may also want to consider a mortgage broker who can help you compare offers from different lenders and potentially negotiate on your behalf.
Negotiating Strategies for Closing Costs
Start Early and Be Prepared
The key to successful negotiation for closing costs is to start early and be prepared. Discussing closing costs as early as possible with your lender can provide you with more time to negotiate and potentially find a better deal. Additionally, having a clear understanding of what costs are negotiable and what are not will help you focus on the right areas during negotiations.
Use Your Leverage
If you’re in a competitive housing market, you may be in a stronger position to negotiate for closing costs. Sellers may be willing to cover some or all of the closing costs in order to close the deal quickly. Additionally, if there are issues with the property during the inspection, you can use that as leverage to negotiate for a reduction in closing costs.
Bundle Services
An effective way to save on closing costs is to bundle services. For example, some lenders may offer discounts if you use their preferred home inspector or title company. Make sure to ask your lender for recommendations and inquire about any potential discounts for bundling services.
Be Willing to Walk Away
If you’ve done your research and feel that your lender is not willing to negotiate on closing costs, don’t be afraid to walk away. There are many lenders out there, and it’s worth taking the time to find one that is more open to negotiation. Negotiating closing costs is an important part of the home buying process, and it’s not worth sacrificing potential savings for the sake of convenience.
Conclusion
Mastering the skill of negotiation for closing costs can save you thousands of dollars when purchasing a home. By understanding what closing costs are and which ones are negotiable, shopping around for lenders, and utilizing effective negotiation strategies, you can successfully reduce your closing costs and keep more money in your pocket. Remember, it’s important to start early, be prepared, and be willing to walk away if necessary in order to secure the best deal for yourself. A little bit of negotiating can go a long way in making the home buying process more affordable and stress-free.
