3 Tips to Saving on Closing Costs

Everyone that buys a house wishes that they could save on closing costs. However, when it comes time to do so, it might be easier said than done. Banks make a good percentage of their money on closing costs and they are not willing to give up on that easily. Therefore, figuring out how to save yourself money on closing costs can be a valuable tool in your arsenal. Here are a few tips to help you save your hard earned money when buying a house.

1. Shop Around

The first thing that you need to do is check out several lenders. Go to your local market and get some estimates from different banks and mortgage lenders. In addition, do a search for lenders online and obtain estimates from them. You should be concerned about the interest rate, but the closing costs should be one of your main comparison factors. Each lender is required by law to give you a good faith estimate which includes closing cost estimates within three days of inquiring about a loan. Therefore, if you start shopping, you should have the final estimates from everyone within three days. If you check out an upfront mortgage lender online, you can even get the estimates right away.

2. Take Your Estimates with You

Once you have several estimates at your disposal, you will have the ammunition you need to get lower closing costs. If you want to work with a particular broker, show them the estimates that you have collected. Someone out there will most likely have lower closing costs for their loans. Use them as an example and ask the broker to match or beat the closing costs provided by the cheaper lender. If they want your business badly enough they will try to make it happen. If they can't lower the closing costs as much as you want, they may be able to lower the interest rate or give you other incentives.

3. Ask about Unnecessary Costs

Pick apart the good faith estimate and try to understand what each individual cost is. Ask yourself if any of these costs seem unnecessary. Some lenders put fake fees in there to add to their bottom line. If you can identify which ones are unnecessary, you will be able to use this to your advantage. If some of the costs do not show up on other lender's good faith estimates, there is a good chance that you don't need to pay them. Show them that no one else is charging for this. If they want to do the loan badly enough, they will remove it for you.