Amidst all the excitement of the home buying process, we sometimes ignore one of the most crucial components of a property purchase: the closing costs. This is one final task to overcome before your dream home is all yours. Since there are a lot of components that make up closing costs, it is imperative that buyers understand all the aspects of the process. Though the amount of closing costs may vary depending on the time of year and other aspects, the main elements involved in closing costs remain the same. These include considerations such as underwriting fees, discount points, and others fees related to the closing process. Below are some ideas to keep in mind in order to keep closing costs low.
Choosing the Right Loan
Choosing the right loan is also a key factor that could affect your final closing costs. With an FHA (Federal Housing Administration) loan, you will likely get approved, even with a low down payment. These loans are often advantageous for buyers purchasing a property that requires repairs or upgrades, as certain loans can be used for home improvement. However, a certain percentage of FHA loans must be paid during closing. When considering an FHA loan, make sure to inquire which fees are due at closing. The same applied for other loans, such as VA loans. Always ensure that you’re aware what will be due at closing.
Locking in Mortgage Rates
Locking in your mortgage interest rate can help keep closing costs under control. Before locking into a rate, it’s advisable to calculate a realistic estimate of when you will close. It’s important to be practical when making this estimate because having to extend your lock in period can result in a percentage fee from the lender that could be added to your final closing costs.
Using Discount Points
Discount points are fees used to lower your rate through purchasing points. Buyers have the option to purchase percentage points on the interest and lock in at a lower rater. However, this often comes with a premium, and the more percentage points you descend, the more they’ll cost. While discount points are a notable way to reach a lower rate, it’s a good idea to compare your monthly rate with the cost of points to ensure that you’ll get the most out of your money.
Negotiating with Lenders
Many lenders can also offer certain perks if you decide to choose their platform. Some will cover closing costs completely, while others may cover a percentage, or a certain sum of the total final costs. Because of the variety of benefits offered by various lenders, it can be beneficial to negotiate with different lenders in order to find not only the best rates, but also the lowest closing costs.
There are plenty of strategies out there for lowering final closing costs on a mortgage. If you’re working with a real estate agent during your home buying process, they can often lend a hand regarding mortgage and loan research. If you would like more information, contact The Damron Group Realtors, located in San Marcos, TX.