• Kale

Can I avoid paying CLOSING COSTS?

Everything you can do to avoid paying thousands to the bank.


Simply put, closing costs are a terrible part of purchasing a home and you should do everything in your power to avoid paying them.

So let's see what we can do.


In general, closing costs range form 3-6% of the home purchase price.

So for a $200,00 home, somewhere between $6,000 to $12,000.


That expense is the sum of the following:

  1. Property appraisal fees

  2. Real estate agent fees

  3. Loan origination

  4. Survey fee

  5. Cost of running a credit report

  6. Home inspection fees

  7. Cost of completing a title search

  8. Taxes on the home loan amount

  9. Document recording fees on the deed and mortgage

  10. Escrow deposit

  11. Mortgage points

  12. Attorney fees

  13. Private mortgage insurance (if required)

Source


Most of these fees are archaic banking nonsense.


Bankers know this. Most people are starting to realize this. And now you can/should definitely negotiate to eliminate as many nonsense fees as possible.


Strategy 1

The first strategy to avoid paying closing costs is to have the lender incorporate the fees into the actual loan. The problem? You end up paying more total than you would have by not doing this strategy.


This should likely only be pursued by individuals with solid but illiquid assets (so they can pay the loan off early & avoid liquidating assets immediately to pay for the closing costs).


Strategy 2

Push the closing costs to the seller.

Your chances of pulling this off largely depend on how desperate the seller is and how strong your offer is.


The benefit to the seller (aside from closing the sale) is the ability to deduct the closing costs paid from the sales price of the home (source). This benefit really only becomes necessary when the capital gains on the sale exceed $250,000 (for individuals)/$500,000 (for married couples) or if the residence is NOT their primary residence.


Strategy 3

Shop around.

This won't entirely eliminate the closing costs, but it can likely save you thousands.


Typical shoppable expenses are: title insurance, homeowner insurance, and home inspection.


Shopping banks/lenders can be equally as effective.

Banks are not all created equal and will charge different rates for application, origination, and attorney fees.


THEY WILL ALL DISPLAY THIS ON THE LOAN ESTIMATE LEGALLY REQUIRED - but, some may charge lower closing fees but have higher interest rates (so they fuck you in a different way).


Strategy 4

Check for employer/union/Army incentives.


Yes - these organizations do provide financial aid to members when they purchase a home. This is likely because of the increased probability you remain with the employer/union/army for a long period of time (turnover expenses are crazy).


Here are some employers that currently pay/help with closing costs.


Strategy 5

Qualify for a grant or assistance program.


Although these programs are primarily for lower-income first time home buyers, it is worth taking a bit of time to see if you may qualify for available state/federal grants.


Here's a list of available grants.

Strategy 6

Buy with cash.


Ok, this may seem obvious (or maybe not?) but if you purchase your home with cash (no loan) then you will avoid almost all typical closing costs.


Per Trusted Choice, "These include loan origination fees, costs associated with having the property appraised, and various closing costs typically required by lenders. This can equate to thousands of dollars in savings."


Maybe an unrealistic option, but life is better when you keep the bankers away from your money.

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