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Nov. 26, 2019
How To Save On Closing Costs, When Buying a Home
You’ve shopped for a good mortgage rate and fought hard to get the best price on your new home. But your bargaining shouldn’t stop there. You can save hundreds of dollars on your closing costs just by shopping around. Just as you would for car insurance or house insurance, title insurance is not much different.
The average title and escrow closing costs due at closing for a $200,000 home should be roughly $1540. This includes the title company’s settlement charges as well as fees charged by third parties such as the surveyor, and county recorder. It doesn’t include the lender closing costs. However, these can vary greatly, depending on what settlement service provider you choose.
You stand a good chance of paying less when closing time comes around if you follow the seven ways to save on closing costs:
1. Pick your own settlement company
Here in the great state of Ohio, your settlements are handled by title insurance and escrow companies. Your real estate agent or lender is likely to suggest that you use an in-house or affiliated settlement firm. But you are NOT obligated to do so. Most often, these firms provide additional compensation to the agent referring their clients. You should have your title company lined up before putting in an offer to purchase a home.
Often the title company is written into the contract. If you are working with a real estate agent, most likely their affiliate is already written in the contract, but they can be changed prior to submitting the offer to the seller.
Like shopping for any service, it’s important to find the right fit for you. Going with an agent's affiliated title company would be like allowing your car salesman to choose your auto insurance company. Your choice of title company may be one of the most important decisions you make to arrive at your final goal of making a timely, yet, cost-effective closing.
2. Know where there’s wiggle room
You need to understand which prices are locked in and which can change. In Ohio, title insurance is state regulated and all title companies charge the same rate premium for title insurance. The county recording fee is another example of a locked rate where there is no wiggle room. There are fees that are negotiable such as wire fees, escrow fees, post-closing fees, document preparation fees, etc. You will need to compare what each company is charging.
3. See if you can qualify for a re-issue rate on the title insurance.
Ask about the title insurance re-issue rate. That’s a discount on the cost of an owner’s title insurance policy. If the sellers purchase their home within a certain period of time – often it’s 10 years – and buy owner’s title insurance, ask for a copy of their policy. With that, you should be able to get a discount on the price you pay.
4. Ask the seller for help with closing costs.
If you’re feeling cash-strapped, you can ask the seller to help pay all or part of your closing costs. It is recommended requesting a specific dollar amount. Check with your lender if they have limits on how much the seller is allowed to contribute.
5. Close near the end of the month.
Of course, you’re eager to get into your new home, but closing toward the end of the month will save a prepaid interest. With a new loan you need to pre-pay interest that occurs from the closing date to the end of the month. So, if you close on the 16th of the month, you’ll have to pay for 15 days of interest. By closing on the 30th of the month you only have to pay interest for one or two days.
6. Make sure the costs on your Loan Estimate and settlement papers match.
Your lender will provide you with a closing disclosure. Be sure to check the loan estimate against the closing disclosure. You will receive your disclosure three days before finalizing your mortgage. Check to make sure the closing fees match what you were quoted from both the lender and the title company.