Tips for Saving on Closing Costs

By Ryan Dosen

 

2014 was somewhat of a strange year in real estate. The housing market was expected to continue its 2013 climb. Interest rates were expected to follow suit. And then we hit a brutal winter wall. Whether it was the weather, underlying market weakness, unstable world economic conditions, or any number of possible factors, the market came out of the gates like a slug and never really reached the levels we had expected.

The rosy-colored-glasses view of things would say that all of those people that were expected to buy in 2014 still have relatively low interest rates and plenty of opportunity in 2015. The authorities are also reporting some of the highest post-recession consumer confidence numbers we’ve seen. Bolstering this rosy-colored view of the market, we are seeing a great deal of activity—far more than that from this time last year—in both the new construction and existing home markets. Speaking with other agents and builders in the area, December was the busiest we’ve had in years and we are expecting a strong year for real estate.

In preparation for what we hope will be a busy year for the real estate market, I sat down with local mortgage expert Joe Gonzalez of GMH Mortgage of Conshohocken, PA to discuss some ways people can help save on the closing costs for their new home purchases.

 

Tip 1: Consider a “Seller Assist” with Closing Costs

Closing costs, including transfer taxes, title insurance, document recording fees, lender fees, and more, can add 3 to 4 percent of the value of a home to the cost of the purchase of the home. Gonzalez says that closing costs are “an excellent item to include in your negotiations with the seller.” Depending upon the financing options available to you, you may be able to negotiate the inclusion of your closing costs in the purchase of your home.

Gonzalez says that for conventional loans with 90 percent or more of the home’s value financed, “seller assists” (where the seller contributes a certain amount of their proceeds toward the payment of your closing costs) are typically capped at 3 percent of the home’s value. If you’re borrowing less than 90 percent of the home’s value, you may be able to get a seller assist of up to 6 percent of the home’s value. (Note: lenders usually cap the “seller assist” at the actual amount of closing costs.)

Negotiating a “seller assist” in the purchase of a home essentially enables you to finance your closing costs instead of having to produce the cash. For cash-strapped, but well-qualified buyers, this is often an attractive option.

 

Tip 2: Compare All of Your Mortgage Options (and Their Fees)

Lender fees and mortgage insurance can represent a significant portion of your closing costs. Depending upon the lender and loan program you choose, these costs can vary widely. Gonzalez reminds us that “if you’re using mortgage financing to cover some of the up-front purchase cost of your home, you’ll have other closing costs to pay including lender fees, mortgage insurance, and more. Be sure to compare all of your options with your trusted mortgage advisor to ensure that you’re getting the best possible deal and paying the least amount in fees and interest.”

 

Tip 3: Ask About Every Fee You’re Required to Pay

When you get to the closing table, the HUD-1 settlement statement will likely be littered with numbers and fees. It’s very easy to get overwhelmed and to just sit down, not ask questions, and sign so that you can get the keys to your new home as quickly as possible. Doing this would be a mistake.

Your lender should present you with an estimation of your costs early in the lending process. Remember: you are the customer. Gonzalez reminds us that “you have the right to know about each one of your closing costs and why you’re expected to pay them.”

Make sure, well in advance of closing, that you have a good understanding of the lender’s fees. You should also receive a draft of the HUD-1 settlement statement a day or so prior to closing. Be sure to compare the fees on the draft HUD-1 with your lender’s estimates to make sure that you’re only paying the proper fees. Taking the time to check these things in advance of closing will make closing go smoother; it’ll also help you avoid that overwhelmed, I-feel-like-I’m-missing-something feeling.

 

Happy New Year

It’s a new year and approximately the one-year anniversary of the start of this weekly real estate column. I have very much enjoyed writing the column and I hope that many of you have found it helpful and informative, and at times, entertaining. Please feel free to reach out directly to me with any comments, as well as anything about which you’d like to hear or learn more.

All the best to you and yours for a happy, healthy, and productive 2015.

 

— Ryan Dosen manages The Wayne Megill Real Estate Team of Keller Williams Brandywine Valley in West Chester. Contact Ryan Dosen for buyer or seller representation or for more perspective on the local and national real estate market by emailing rdosen@megillhomes.com or calling 610-399-0338. Please also visit The Wayne Megill Team blog at www.PAHomesAndRealEstate.com.

 

This article was published by 21st Century Media and the Daily Local News (West Chester, PA). To read this article on the the newspaper’s site, please visit the Daily Local News.

 

 

To view all of Ryan Dosen’s 21st Century Media real estate columns, visit http://www.dailylocal.com/search?text=dosen.