How to Buy a House and Minimize Closing Costs in 5 Ways

Zreilly20 By Zreilly20, 29th Jun 2012 | Follow this author | RSS Feed | Short URL
Posted in Wikinut>Money>Mortgages

Learning how to buy a house doesn’t stop at considering your mortgage options and finding out how much you can afford with your current income. You should also learn how to minimize closing costs to avoid paying unnecessary fees or high mortgage payments. The key to minimizing closing costs is to research and plan your financial transactions carefully with a licensed professional.

Save Money on Buying a House

After finding the perfect home and paying the down payment, it’s time close the deal on your purchase. What does closing a home loan involve? Aside from finally getting the keys to your newly purchased house, closing a mortgage also involves settling the closing costs. It can definitely hamper your finances if you don’t ask about this while finding the requirements on how to buy a house. You can use the tips listed below to finally buy a house without paying too much on closing costs.

What are Closing Costs?

A lot of home buyers think that they’ve got everything figured out regarding how to buy a house. Despite their knowledge, most of them still get shocked when they’re asked to pay $2000-$3000 more on their first payment because of closing costs. These closing costs include range from 1 to 8 per cent of the sale price, and it usually includes payment for house appraisals, loan processing fees, title searches, attorneys, deed recording and everything that was done to process the sale.

This means that the lowest closing cost for a property sold for $200,000 is $2,000. That’s assuming that the closing costs are only 1%. As you can see, these costs can cost you a lot of money if you didn’t take them into consideration when asking your agent for help on how to buy a house.

Tips to Lower Closing Costs when Buying a House

1. Ask the seller to cover the closing costs. Some sellers won’t mind paying the closing costs, especially if they’re in a hurry to sell their house. If the seller refuses to pay all the closing costs, you can ask him or her to cover part of the amount for you. Most sellers welcome with this type of arrangement.

2. Close the deal at the end of the month or towards the end of the month. Learning how to buy a house doesn’t stop in finding the perfect mortgage. To minimize the closing costs, you should close the deal towards the end of the month to minimize the pro-rated interest your mortgage lender will charge you. If you close the deal on the 3rd of the month, your lender will bill you for interest from the 3rd towards the end of the month, this extra amount will increase your closing costs.

3. Avoid PMI fees by using piggy back mortgages. Some lending companies require buyers to pay PMI with their closing costs, if the amount they borrowed is more than 80% of the property’s purchase price. You can avoid this by using a piggy back mortgage, you just need to take out one mortgage that’s less than 80% of the purchase price and take out a second mortgage to finance the remaining amount you need.

4. Get assistance on closing costs from your State Housing and Urban Development or HUD. Local HUDs can help you get financial assistance to help cover your closing costs. These programs have certain requirements for income and credit score, so be sure to ask about these as well.

5. Get an attorney that’s approved by your lender. If you choose an attorney that’s not approved by your lender, you may end up paying extra fees because they’ll ask you to get someone else to represent you legally. Paying another attorney, that’s not even approved by your lender, can cost you an extra $500.

If you don’t have any idea how to buy a house, don’t let yourself be fooled by loan advertisements offering low closing costs and mortgage payments. Investigate and read the fine print before you sign on the dotted line. Spending a few minutes reading the details of your mortgage will help you save money and avoid sticky situations in the future.


Closing Costs, How To Buy A House, How To Reduce Closing Costs, Mortgages, Real Estate

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author avatar Retired
29th Jun 2012 (#)

Very good article.

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