How to Negotiate Low Closing Costs

Getting low closing costs for your mortgage is ideal, but not everyone accomplishes it. You will probably pay a few thousand dollars in closing costs depending on the loan that you are requesting. While there is no way to completely get out of closing costs, you can significantly lower them if you know what you're doing. Here are a few things that you can try to help get the closing costs down to a more reasonable level.

Shop Around

The first thing you should do is shop with multiple lenders. Visit all the local banks, all the mortgage lenders, and all the sites online that you feel comfortable visiting. Get as many quotes as you can from them. They will all provide you with a good faith estimate within three days of you applying for a loan. This good faith estimate outlines all of the individual charges that you can expect if you do business with them. They are required by law to present you with this good faith estimate within three days of application. This collection of good faith estimates will give you the ammunition you need for a better chance of getting low closing costs.

Study the Estimates

Once you have collected the good faith estimates from several lenders, go through each one of them line-by-line. You will find that many of them have similar items, but some may have different names for the fees. You will see that some are much higher than others on certain things. You will find origination fees, title search fees, appraisal fees, points, and many other components on the estimate. Keep notes on all of the estimates that you review and get an idea of who has the lowest overall fees. 

Negotiate

Once you have reviewed the collection of good faith estimates, you need to take it to the lenders that you would like to work with. The best idea is to go visit the companies that are offering you the lowest interest rate first. Sometimes, the companies that have the lowest interest rate do not have the lowest closing costs to go along with it. That is how they make up for the difference. While the closing costs will be a one-time fee, your interest rate will cost you money each and every month over the life of your loan. 

Once you decide which lender you want to visit first, go in and take all of your good faith estimates with you. Talk to your loan officer and ask him to lower their closing costs. Show them the good faith estimates that you have that demonstrate that other lenders are willing to offer it cheaper. Let them know that you would like to do business with them, but you want them to lower their closing costs. Often they will accommodate your needs. If not, walk out and visit the next lender that will.