Insiders Explain: How Some Home Buyers Get Out of These 4 Common Closing Costs

Title agents say home buyers sometimes pay more than they need to at closing. Why?

For one thing, picking all the fees apart usually won’t be a priority during the stressful days leading up to a final loan approval. And who wants to get picky at closing? That’s when a buyer is tired and itching to walk out of the office with keys in hand.

Even if the buyer notices the extras, most buyers don’t know the difference between unnecessary “junk fees” and must-have services.

So, are there items you could try to negotiate with companies to ease the closing cost burden? Yes. Buyers might be able to shave off fees—if they know what to ask for. Consider these potential cost-cutting opportunities, as explained by title company insiders.

1. Ask About Closing Cost Credits From the Lender. If You Don’t Ask, How Will You Know?

Closing fees can potentially amount to 4% of the loan? Whoa, what gives? So many extra fees! Surely the lender can cut you a break? Actually, yes.

You’d think they’d tell you. It would just be good business! But they might not. So, pause to ask the lender what part, if any, of your closing costs they’ll take off. Are they offering credits? A discount on the interest rate?

The answer has to be agreed upon before your rate is locked. So, make it a point to ask when you first contact your broker or lender.

While we’re on the subject, it’s a good idea to shop around for lenders. Different lenders have different loan programs they’re accustomed to using. Their offerings do vary. Shop around, and you could save thousands of dollars on your loan.

No matter what you do, if you can’t make an all-cash offer, you’re going to have significant closing costs. But this can be one way to shave off an amount worth asking about. 

Gift funds from friends or family can help pay for the down payment or your closing costs. Your mortgage consultant will require proper documentation of sources of funds, as well as a gift letter.

2. You Can Pick Your Title Company. Call a Few.

Real estate companies and lenders always have relationships with title companies. Most buyers are fine with that and go with the title company that’s picked for them. Buyers do have a choice, though.

Your settlement statement will include the fees charged for title support. You may be able to save hundreds of dollars by shopping around. Ask for transparent and full quotes from several companies and find out the difference for yourself.

When the title company offers you an owner’s title policy, strongly consider saying yes. That’s not a junk fee. You’re going to have to pay for a policy with your lender as beneficiary—so why not show yourself the same concern? Ask about an enhanced policy that guards your deed from title theft. Be sure the agent walks you through available coverage options.

And while we’re on the topic of title companies…

3. A Title Agent Can Handle the Work Usually Done By a Real Estate Agent or Lawyer. Check Your Laws.

You can get an agent from a title company to guide your transaction. A title company has lawyers who draw up state-compliant purchase agreements, disclosure forms, and all the paperwork needed for closing. They can also get your escrow account set up. They can review the deed for a transfer of ownership. And they can record the deed.  

All of this might come as a surprise to many hopeful buyers. It might also save them thousands of dollars.

Important note: Depending on your state law, hiring a real estate attorney might or might not be required for a home sale transaction. Before buying or selling a home, look up your local and state laws on real estate transactions.

4. What About Fee Waivers for Commission and Admin? Ask the Real Estate Agent.

Is your agent’s commission getting covered by a builder or seller? If so, the lender may let the agent pass a rebate to you to shave a bit off your settlement check. Allowable credits from builders and other sellers may be restricted by loan rules. But here again, the question’s worth asking. A commission rebate, says Pennsylvania-based ALT Title company, can save a home buyer $1,000+. The company says some agents and real estate firms are willing to oblige. The act of good will to a client makes good business sense.

Note that brokers sometimes charge admin fees to use their service providers. You don’t need to use those providers, per federal law.

Broker admin fees add up to hundreds of dollars. They might involve ordering title insurance coverage, liaising with the mortgage broker, setting up settlement appointments, or handling communications in general. But the title company might already be managing all of those tasks.

Ask about these possible breaks while you’re still interviewing your agent, if possible. Once you’ve signed a contract with any agent or business, fee negotiations are usually non-starters.   

Government-issued grants can mean having to write a much smaller check at closing, or lower monthly costs if your closing costs are folded into your loan. Seek out first-time buyer assistance if this will be your first deed to a home. You can still count as a first-time buyer if you’ve not owned your primary home in the past 3+ years.

The Main Thing: Don’t Let Closing Deplete the Funds You’ll Need as a New Deed Holder

Depending on the price you’re paying for a home, your closing costs could easily add up to something between $10 – 20K. That could put a massive dent in your reserve funds.

Yes, you must keep reserve funds. A good mortgage consultant will stress this point. If you spend all your savings, retirement funds, etc. on a home, you won’t be able to actually take care of the home. Will you need to repair or replace appliances? Will the roof or the HVAC system need to be replaced in the not-too-distant future?

Also, anticipate a rise in your property taxes after the home is appraised and the deed changes hands. Your local government could slap a surprise on your budget. To understand where the home is with current property taxes, don’t use the figure that the popular real estate websites show. Visit the township website and find the property’s assessed value. Then, assume that assessment (and tax) will only go up.  

Best all-around policy? To get the best home you can afford, buy less home than you can afford.

One more important note: This article is just a starting point for your own due diligence. Nothing on this (or any other) website should be relied on as financial or legal advice. For individual guidance, speak with your own professionals.