Are closing costs starting to give you heartburn as you near your closing date? You should talk with your Loan Officer (LO) to find out if any of the following options could apply to you and lower those last minute out of pocket costs.
Lender Credits
If you’re really in a tight spot, you may be able to get lender credits, which means that the lender will cover some of your closing costs (certain limitations may apply.). However, be prepared to agree to a slightly higher interest rate for the courtesy, which can mean paying thousands more over the term of your loan. You should carefully consider all of your options before financing your closing costs with lender credits.
Seller Concessions
If you want someone else to pay closing costs but don’t love the idea of higher interest rates, you can try to get your seller to pay some of your closing costs. If you are the only person with an offer on the table and the seller is motivated, they may agree to cover a percentage of your closing costs, or agree to pay specific line items, such as:
- Property taxes due at closing Title insurance
- Loan origination fees
- Inspection fees required for underwriting approval
- Recording and document fees
- Appraisal fees
- Attorney’s fees
- Mortgage discount points
Of these, if you can cover the rest of your closing costs, mortgage discount points can be the most beneficial. You can significantly cut the amount you pay over your loan term if you can get even half a percentage knocked off your interest.
However, beware of massive seller credit that you won’t be able to use effectively. Many agents believe that lenders charge exorbitant fees and that you can use the credit to defray those. However, knocking the same amount on the purchase price could be a much better deal, even though agents don’t like it (because it drops their commission.)
Talk to your LO and bring the agents into the discussion. It could be that a solution that works for everyone can be arranged. Just don’t blindly accept thousands in seller credits if you already have closing costs accounted for and have negotiated fees down with your lender.
Real Estate Agent Credits
A buyer’s agent might be willing to rebate part of their commission to you. Be aware that the state you live in might not allow this to happen before closing, but if you can manage to cover closing costs you could be reimbursed promptly if you can come to an agreement.
Even if you have to pay all of your closing costs yourself, don’t let such a relatively small obstacle block you from home ownership. Where there is a will, there is a way, and you will benefit greatly from owning your own home in the long run.
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