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5 Ways You Can Reduce Your Mortgage Home Loan Closing Costs

07/21/2010

The closing costs of a home mortgage include expenses such as appraisal fees, inspection fees, broker fees, title fees, administrative fees, and others. The closing costs can account for a significant portion of the cost of the loan. When looking for the lowest mortgage rates to purchase or refinance a home, ask lenders what closing costs will be required in the deal and what the fees will amount to. Often, the lender who requires the lowest closing costs is the better deal.

There are several things you can do on your own to keep closing costs low, however. The following five tips will help you secure a mortgage with the best rates and lowest fees.

Check your credit score.

This goes without saying. If you have poor credit, lenders will be less willing to help you out with closing costs. Unless you're dying to buy or refinance a home immediately, take steps to repair your credit. This will help you get a loan with better rates in the first place, but it will also establish you as someone whose finances are in order and well tended. This will increase your chances of getting a deal and lowering closing costs.

Don't add the closing costs into the loan itself.

It's true that carrying the closing costs out over the balance of the loan will eliminate all immediate expenses. However, over the course of the mortgage, you'll be paying far more than you would have paid up front due to interest. You'll literally pay tens of thousands of dollars more on your closing costs by adding them to the balance of the mortgage. If your goal is to save money, find a way to pay for these expenses up front.

If you're refinancing, work with your current lender.

This is only applicable if you're refinancing rather than a first time home buyer. If this is the case, try to work with your current lender. He or she will likely cut you a deal in order to prevent you from going to a competitor.

Negotiate with your lender.

You can negotiate fees. Every mortgage deal is unique, and your lender recognizes this. Try to talk your way out of high closing costs. Fees can be reduced, especially administrative ones. Don't be afraid to tell your lender that you're checking out other lenders, too.

Ask for a free month.

Your lender may be willing to waive a mortgage payment at the start of the loan term. Put that month's payment toward the closing costs instead. Whether your lender will agree to this or not is dependent upon your personal situation and the timing of the loan--beginning of month versus end of month--but many homeowners have negotiated such deals for themselves and saved a significant amount of money as a result.

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