What Are Some Tips for Avoiding Unnecessary Closing Costs?


Quick Answer

Potential homeowners can save money and avoid unnecessary closing costs by requesting mortgage rates and a list of fees and closing costs from several mortgage companies, explains HSH Associates. Lenders who know potential clients are shopping around may waive fees or offer discounts to obtain business.

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People should also avoid paying for points when interest rates are low, warns HSH Associates. Paying points to lower the interest rate can add thousands of dollars to the closing costs. Homebuyers should also research the mortgage tax in each state when seeking a location to buy a home. Some states impose additional mortgage taxes that can take closing costs to approximately 9 percent of the home's value.

Homebuyers can save money by shopping around for mortgage insurance and negotiating the terms, explains HSH Associates. A lender may recommend a particular insurance company, but homebuyers have the option to compare prices, gather estimates and purchase their own insurance outright instead of wrapping it into the loan. Lenders may request one year of home owner's insurance at closing for an escrow account, but this can be negotiated to six months or less, reducing the overall closing costs.

Potential homebuyers should carefully review the fees charged by lenders, brokers and title companies, recommends Realtor.com. It is possible to negotiate that some fees are waived or reduced, especially when administrative fees, miscellaneous fees and wire transfer fees can increase the closing costs significantly.

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