The joy of buying a home can quickly turn into sticker shock when you see the total closing costs. But here’s the good news: many of those expenses aren’t set in stone. With some smart planning — and a little insider guidance from your agent or loan officer (that’s us!) — you can often bring those costs down.
Let’s walk through how to reduce closing costs without risking your approval or your sanity.
What Are Closing Costs, Really?
Closing costs are the collection of service fees and prepayments that finalize your home purchase. They typically include:
- Lender fees (application, underwriting)
- Property appraisal and inspection
- Title services and insurance
- Property taxes and homeowners insurance paid in advance
- Escrow account setup for future bills
On average, they total 2% to 5% of the home’s price.
1. Get Quotes From Multiple Lenders
Every lender sets fees a bit differently. By requesting Loan Estimates from more than one, you can compare:
- Rate offers
- Origination charges
- Discount point structures
A slightly lower interest rate or reduced fee can equal thousands saved — so it’s worth shopping around.
2. Push Back on Lender Fees
While some costs are standard, others might be more flexible than you think. Ask your lender if any of the following can be reduced or waived:
- Application or admin fees
- Processing charges
- Rate lock costs
You won’t know until you ask.
3. Work With a Knowledgeable Agent
A good agent helps more than with showings — they also:
- Recommend cost-efficient escrow and title companies
- Review your Loan Estimate for unusual fees
- Negotiate credits from the seller to cover part of your closing costs
This alone can shave off hundreds or even thousands.
4. Request Seller Credits
Depending on the market and how motivated the seller is, you may be able to ask them to cover some of your closing costs. This is more common when:
- The home has been listed for a while
- You’re offering at or near full price
- You’re willing to close quickly
Just remember: each loan type has limits on how much sellers can contribute.
5. Shop for Title and Insurance Services
You’re not locked into one title company or insurer. You can select your own — and pricing can vary a lot. By comparing providers, especially locally owned ones, you might find better rates than national firms.
6. Consider a No-Closing-Cost Option
Some lenders offer loans where they cover closing costs in exchange for a slightly higher interest rate. This isn’t free — you’ll likely pay more over time — but it can be helpful if you’re short on upfront cash and planning to refinance or move within a few years.
7. Tap Into Assistance Programs
Many states and communities offer grants or loans to help cover closing costs, especially for first-time buyers. These programs may be offered by:
- State housing finance agencies
- Local nonprofits
- Employers or unions
Ask your lender to help you identify what you may qualify for.
8. Double-Check Your Loan Estimate
Before you head to closing, review your Loan Estimate with your agent or lender to catch:
- Duplicate charges
- Unnecessary line items
- Mistakes that might have crept in
It’s your right to ask questions and request clarification.
FAQs
Q: Can closing costs be added to the mortgage?
A: With purchases, usually no. For refinances, it’s more common — if the home appraises high enough.
Q: How much are typical closing costs?
A: Around 2% to 5% of the purchase price. So for a $300,000 home, expect $6,000 to $15,000.
Q: Can the VA loan cover all closing costs?
A: VA loans restrict certain fees and allow seller or lender coverage for many others, but some costs still apply.