Save thousands by being creative with your closing costs.
There are ways for you to reduce your closing costs or at least spread these costs out to reduce your burden. Any one of the following options can be utilized, quite possibly reducing your actual closing costs to zero. Let’s take a look at your options:
Seller Pays
— When negotiating the price for your home, you can ask the seller to pay for your closing costs. This option is much more likely if you’re the only party interested in the home and the seller wants out. If the seller refuses your offer, counter with a plan whereby you and the seller split your costs. This might come in paying exactly half of your closing costs or the seller contributing a flat amount, such as $2,000.
Lender Pays
— Are you willing pay a slightly higher percentage for your home loan if the lender picks up your closing costs? Instead of getting a 30-year loan for 4.5 percent, for example, you might agree to pay 4.625 percent over the life of the loan, effectively rolling your closing costs into the loan. Some banks offer special programs where you can still get the low rate, but the bank caps your closing costs at a fixed amount, such as $1,500.
Itemize Expenses
— If the seller won’t budge and no lender is offering you a “no closing cost” loan, you can save money by line itemizing your expenses and negotiating each expense for a lower cost. This may mean shopping for title insurance yourself, asking your attorney to drop his fee or questioning miscellaneous fees that aren’t necessary. Your savings won’t be tremendous, but you could shave several hundred dollars off of your closing costs. Ask your lender to go with the smaller of the required escrow amounts too.
If closing cannot be avoided, consider placing these costs on your credit card and earning points toward airline miles, hotel stays or cash back. Transfer this balance to a zero percent interest rate credit card and pay off the balance before the discount period ends. You may be able to avoid transfer fees too with some plans.
Closing costs are typically not tax deductible save for those counted as property taxes. Your moving costs and some other expenses may be deductible, costs which may partially offset your closing costs and reduce your overall tax burden.
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