As you’re probably well aware, closing and the inevitable closing costs constitute the final hurdle to overcome in finalizing the transaction and walking away with the keys to your new home. And because buying a home is typically a long and arduous process, many buyers are tempted to just pay the closing costs to get the whole thing over with. But closing costs can amount to 5% of a home’s purchase price – and that’s no small chunk of change. It pays, then, to do everything you can to get those closing costs lower. So let’s take a look at 6 ways to lower your closing costs when buying a house in New Jersey.
1. Comparison Shop by Comparing Lenders’ Loan Estimate Forms
The first place you’ll find your closing costs itemized is in the official document called the “Loan Estimate” form. This is probably the best place to begin when trying to lower your closing costs.
“Your closing costs are technically first itemized in the three-page ‘Loan Estimate form that your lender must produce within three business days after you apply for a mortgage. It’s a little-known fact, but some lenders will give you a Loan Estimate form even before you apply for a loan, although it’s not required. (Note: You’ll receive a final ‘bill,’ called a ‘Closing Disclosure’ form, three days before closing.)”
You should get a Loan Estimate form as soon as possible because it will allow you to “comparison shop between companies’ total costs and also dig into specific fees once you’ve chosen a lender.” That way you can find the company offering the lowest closing costs. Just make sure you get the actual Loan Estimate form, not the “closing costs worksheet” or a “fee itemization.”
2. Take a Careful Look at Where the Savings Are
Besides allowing you to comparison shop, using the Loan Estimate form can also help you find where the savings are in order to lower your closing costs when buying a house in New Jersey. And here’s what you need to know . . .
“The bottom of the first page of the Loan Estimate form shows the total closing costs and cash needed to close the loan. The heart of your savings is Section C, page 2: ‘Services You Can Shop For.’ These fees include”:
- Title search
- Title insurance binder
- Lender’s title policy
- Settlement agent
The priciest of these services is where you can save the most. Typically, these are the title insurance and the settlement services.
3. Negotiate the Mortgage Lender Fees
Another area where you can lower your closing costs is the mortgage lender fees. Many times, lenders will be willing to work with you, and so you may be able to negotiate some of the fees. Lenders want your business, so they may very well be inclined to be flexible on fees.
Industry pros recommend that you “take a close look at all the fees and see if the lender is willing to reduce the costs or drop any of them. There’s a lot of competition these days among mortgage lenders, so it never hurts to ask.”
4. Get the Seller to Pay Some of the Closing Costs
You can also try to get the seller to pay some (and sometimes all) of the closing costs, which will lower your closing costs substantially.
For example, “[s]ellers can sometimes provide a closing cost credit, which would mean the seller gives you money back at closing to cover some of your upfront fees. You’ll need to negotiate this with the seller as part of your purchase agreement when you make an offer. Be aware, though, that “[t]he seller may not be willing to do this in a competitive market if they have multiple interested buyers, [and lenders] also typically have restrictions on how much a seller’s credit can be.”
To deploy this strategy effectively to lower closing costs, you’ll need to lean on your agent’s negotiating expertise. To discover more about this, just call 855-966-DEAL.
5. Time the Closing Correctly
Strategically timing your closing can also be an effective strategy to lower your closing costs when buying a house in New Jersey. The reason this can work is that “[c]losing costs typically include prepaid daily interest to cover the interest costs that will be incurred on the loan between the time you close on the home and the time the first payment is due.”
So if you time the closing to occur at or near the end of the month, “you can minimize the amount of prepaid interest you owe, which would reduce the fees you’ll owe.” And the upshot is that it will lower your total closing costs.
6. Buy Less Home
As a last resort, you can lower your closing costs substantially by simply buying less home. The smaller the purchase price, the less you’ll pay in closing costs.
The smaller price tag will reduce many of the costs, including “[t]itle insurance fees, appraisal and survey expenses, transfer taxes, and a host of other fees.” In addition, with a less expensive home, you won’t have to pay as much down, which will leave you more cash to cover closing costs.
And Work Closely With Your New Jersey Agent
Finally, if you really want to do all you can to lower closing costs, be sure to work with an experienced local agent. Your New Jersey agent will know all the ins and outs of the local market and, consequently, all the tips and tricks to lower these costs. So if your goal is to lower your closing costs when buying a house in New Jersey, contact us today at 855-966-DEAL.