Getting a home loan involves a big financial outlay, but few of us are aware of just how long the docket can run. Your home is probably the most expensive thing you’ll ever own, that expense goes beyond the closing price. There’s the cost of the house, but then there are other ongoing and upfront expenses that can catch you off guard.
When you’re negotiating a home sale, your lender will provide you with a Loan Estimate, detailing what closing costs of home loans are likely to be. The problem is that the many fees itemized on that Loan Estimate can be hard to understand. We’ve translated some of the common fees below.
Fees, fees, fees….!
Phew! That’s a lot of potential fees and charges
Don’t despair. Now that we’ve talked about some of the closing costs you’re likely to face for a home loan, here are six tips for cutting those costs down to size:
With closing costs of home loan, a lot of money is on the line. That’s a good reason to shop around for the lender who offers the lowest closing costs. You can also ask a lender to match the low closing costs offered elsewhere. Besides getting quotes from multiple lenders, you can get quotes for some services as well. There are some services included in the closing costs (the pest inspection fee, the survey fee, the title search, etc.) that you are allowed to shop around for. You don’t have to go with the provider your lender suggests and you can try to find a lower price elsewhere. The closing cost services you can shop for will be listed as such on your Loan Estimate. Do some research, make some calls and see if you can find cheaper options.
2. Evaluate the Loan Estimate
When you get the Loan Estimate, don’t just glance at it. Take the time to go through each item with the lender, questioning what each fee covers—and why it costs as much as it does. This is a good way to identify padded or unnecessary fees. Also, keep an eye out for fees with similar names, as they may mean the lender is charging twice for doing the same thing. A common example: processing fees and underwriting fees.
3. Negotiate fees with the lender
Once you have a handle on the fees, the lender wants you to pay, you can start negotiating. Ask for more obscure fees to be knocked off the final price tag. Ask your lender to give you what’s called the Closing Disclosure form (detailing your final closing costs) as soon as it is available. Compare what’s on the Closing Disclosure to what was on the Loan Estimate and ask your lender to justify any discrepancies.
4. Ask the seller to sweeten the deal
Some sellers will lower the sale price of the home to offset the sting of closing costs. Others may cover some of your closing costs. Depending on the market and the seller’s motivation level, you may negotiate with the seller to reduce some closing costs of home loan.
5. Delay your closing
Remember the pre-paid daily insurance charges from the list above? You can minimize those charges by closing at the end of the month. Plan ahead and try to schedule your closing when it means you’ll have to pay less money upfront.
6. Save on points (when interest rates are low)
If you’re buying in a low interest-rate environment, you probably don’t need to pay extra for points to lower your interest rate. Each point will cost 1% of the loan value, so paying for points can add up fast. You pay that money upfront as part of the closing costs of home loan. For each point you buy, you’ll have to stay in the home for longer if you want to break even.
Having a mortgage broker on board that can help you buy quickly, and at the best possible price, can be invaluable to buyers. At Nfinity Financials, we markedly minimize the stress you might have about closing costs of home loans.
We know there are a million ways you’d rather spend your money, but closing costs of home loans are a necessary step to homeownership. You don’t have to like them, but you have to pay for them. It’s best to focus on how to reduce closing costs so you aren’t paying more than you have to.
You can dip your toes in the water with the best mortgage broker in Sydney. Browse our loans and see what they could cost. When the time comes, don’t feel like you have to do it on your own. Call us on ‘1300 Get loan’ or visit https://nfinityfinancials.com/ .