Surprising Way to Lower Your Closing Costs
When buying a new home, not only are you making a down payment, but you must also pay for the closing costs. Closing costs are the fees for services incurred to close your mortgage loan. Although closing costs are associated with both buying and selling real estate, more costs are paid for by the buyer.
Closing costs average three to five percent of the sale price of the house. If you buy a $92,350 home, your closing costs will be an estimated $1,847 to $4,617. According to Investopedia, Idaho has the second lowest closing cost average in the United States and mortgage rates Boise ID. The national average is $1,847 and Idaho’s average is $1682.
Closing costs rise in proportion to the rising value of homes. There are strategies you can use to make your closing costs as low as possible. Take a look at four surprising ways to lower your closing costs.
Schedule settlement close to the end of the month
Mortgage interest is a closing cost that must be paid at closing. It is prorated interest due from the closing date until the last day of the month. If the settlement date is closer to the end of the month, the less you have to pay.
You can calculate the savings using this calculation: Multiply loan amount by the interest rate to get the annual interest charge. Determine the daily interest charge by dividing the annual interest rate by 356 (days of the year). Multiply the daily interest charge by number of days you have until the end of the month. You can compare the savings by substituting different number of days left.
Ask the seller to pay for your closing costs
The seller may be willing to help pay part or all of the closing costs for you. Sellers are more likely to assist if they are offered the full asking price of the house. Sellers who are in a hurry to close may assist with closing costs to expedite the real estate transaction. This seller will consider buyers who are already approved for a mortgage loan and can close as soon as possible.
Does your bank offer discounts on mortgage loans?
Many banks offer their customers discounts and rebates on mortgage loans. The bank may offer a discount on their origination fee. They may also issue a rebate for purchasing a home or refinancing a mortgage loan.
Obtain a loan estimate form from your prospective lender
The loan estimate form is a three-page form which displays your mortgage loan details. It is provided by the lender three days after applying for the loan. The loan estimate will give you an estimate of the closing costs. The Consumer Financial Protect Bureau (CFPB) provides an Estimate Explainer. The loan estimate explainer teaches you how to read and use the loan estimate form.
By closing near the end of the month and getting assistance from the seller to pay for the closing costs, you should see a significant decrease in your estimated closing costs. Banks may or may not offer incentives on mortgage loans to their existing customers, but it does not hurt to ask. The loan estimate form will give you a detailed look at your mortgage terms. You may use the form to review your anticipated costs. These strategies may help lower your closing costs.