35+ Exceptional Tips for Reducing and Managing Closing Costs

When buying a home, closing costs can add thousands of dollars to your expenses. These costs go beyond your down payment and can catch many buyers by surprise. Here are over 35 unique and actionable tips to help you understand, manage, and potentially reduce your closing costs.

Understanding Your Closing Costs

1. Break down your Loan Estimate: When you receive your Loan Estimate, highlight each fee and make sure you understand what it’s for. Don’t hesitate to ask your lender to explain any item you don’t understand.
2. Create a closing cost spreadsheet: Make a simple spreadsheet listing each closing cost, who it’s paid to, and whether it’s negotiable. This visual organization can help you target which fees to try negotiating.
3. Learn your state’s average closing costs: Research the typical closing costs in your state. This knowledge gives you leverage when negotiating and helps you spot unusually high fees.
4. Understand the difference between recurring and non-recurring costs: Non-recurring costs happen once (like appraisal fees), while recurring costs continue after closing (like property taxes). Budget for both types differently.
5. Know which fees are legally regulated: Some closing costs have legal limits or requirements. Research which fees are regulated in your state so you know when a charge might be excessive.

Timing Strategies

6. Close at the end of the month: Scheduling your closing near the month’s end reduces the amount of prepaid interest you’ll owe at closing, potentially saving hundreds of dollars.
7. Avoid closing during peak seasons: Spring and summer are busy real estate seasons when service providers might charge premium rates. Fall and winter closings can sometimes mean lower third-party fees.
8. Time your closing with property tax schedules: Research when property taxes are due in your area. Closing after a tax payment date can reduce the amount you need to prepay at closing.
9. Lock your interest rate strategically: If interest rates are trending down, a short-rate lock period might be beneficial. If they’re rising, locking for a longer period might be worth the extra cost.

Negotiation Techniques

10. Use competitor quotes as leverage: Get estimates from multiple lenders and title companies, then ask your preferred provider to match the lowest fees you’ve found.
11. Negotiate “junk fees” individually: Rather than asking for general fee reductions, target specific fees like “processing fees” or “administrative fees” that don’t represent actual services.
12. Ask about relationship discounts: If you have accounts with the bank providing your mortgage, ask about customer loyalty discounts on closing costs.
13. Negotiate attorney fees upfront: If your state requires a real estate attorney, discuss their fee structure before hiring them. Some attorneys will work for a flat fee rather than an hourly rate.
14. Challenge the transfer tax calculation: In some jurisdictions, transfer taxes are calculated based on sale price. Ensure personal property items (like appliances) are properly separated from the real estate value.

Lender Selection and Loan Strategies

15. Compare Total Loan Costs, not just interest rates: A slightly higher interest rate with significantly lower closing costs might save you money if you plan to sell or refinance within a few years.
16. Ask about closing cost assistance programs: Many states and counties offer closing cost assistance, particularly for first-time homebuyers or purchases in specific areas.
17. Consider portfolio loans: Some lenders keep loans on their own books rather than selling them to investors. These “portfolio loans” sometimes offer more flexibility with closing costs.
18. Investigate credit union options: Credit unions often charge lower fees than traditional banks and might offer member-specific closing cost benefits.
19. Look into first-time homebuyer loan programs: Government-backed programs like FHA, USDA, and VA loans often have limits on certain closing costs.
20. Ask about lender-paid mortgage insurance: Though it comes with a higher interest rate, lender-paid mortgage insurance eliminates the upfront mortgage insurance premium at closing.

Third-Party Fee Reduction

21. Bundle home insurance with auto insurance: Insurance companies typically offer discounts when you bundle policies, which can reduce your prepaid insurance costs at closing.
22. Shop for title insurance: In many states, you can shop around for title insurance. Rates can vary by hundreds of dollars between providers for the exact same coverage.
23. Question courier and delivery fees: With digital document delivery now common, challenge any excessive courier or delivery fees for document handling.
24. Research survey requirements: In some cases, you might be able to use an existing property survey rather than paying for a new one if the property boundaries haven’t changed.
25. Consider title company recommendations: Real estate agents and lenders often have relationships with title companies that may result in discounted services.

Seller Contribution Strategies

26. Request a seller credit for specific repairs: Rather than asking for repairs to be completed before closing, request a credit at closing. This can help offset your closing costs while letting you control the repair work.
27. Structure your offer with closing costs in mind: When making an offer, consider offering a slightly higher purchase price in exchange for the seller covering a portion of closing costs.
28. Time seller credit requests strategically: Ask for seller credits to cover closing costs after your inspection when you might have more negotiating power.

Preparation and Saving Techniques

29. Set up a dedicated closing cost savings account: Create a separate savings account specifically for closing costs to ensure you don’t accidentally spend these funds.
30. Prepay some closing costs: Ask if you can pay some fees, like the appraisal or home inspection, before closing day to spread out your expenses.
31. Check for employer assistance programs: Some employers offer homebuying assistance as a benefit. Check with your HR department about possible closing cost reimbursement.
32. Use gift funds specifically for closing costs: If you’re receiving gift funds for your home purchase, earmark them specifically for closing costs rather than the down payment if your down payment is already covered.

After You Receive Your Closing Disclosure

33. Compare your Closing Disclosure to your Loan Estimate: Federal rules limit how much certain fees can increase from your Loan Estimate to your Closing Disclosure. Check for discrepancies and challenge any significant increases.
34. Look for duplicate charges: Sometimes closing costs can include duplicate charges for similar services. Carefully review for any overlap in services.
35. Verify tax prorations: Ensure that property tax prorations are calculated correctly based on the actual closing date and local tax calendar.
36. Check the recording fee calculation: Recording fees are often based on page count. Verify that you’re not being charged for more pages than your documents actually contain.
37. Confirm that all credits appear: Ensure that any credits from the seller, lender, or other sources appear correctly on your Closing Disclosure.

Post-Closing Strategies

38. Save your closing documents for tax purposes: Some closing costs are tax-deductible. Keep detailed records for potential tax benefits.
39. Consider recasting your loan instead of refinancing: If you come into extra money later, loan recasting (reducing your loan balance and monthly payment without changing your interest rate) can avoid the closing costs associated with refinancing.
40. Review your tax assessment: After closing, check if the property tax assessment seems too high. Appealing an incorrect assessment can reduce ongoing property tax costs.

By implementing these strategies, you can potentially save thousands of dollars on your home purchase. Remember that being informed and willing to ask questions are your best tools for managing closing costs effectively.