“Closing, or settlement, costs are expenses over and above the price of the property,” says MacDonald. Both the buyer and seller incur some of these expenses when transferring ownership of a property.
“Who actually pays, however, often depends on local custom and what the buyer or seller negotiates,” explains MacDonald. Closing costs can average between 2 to 3 percent of the total home purchase price. These costs normally include title insurance, loan points, escrow or closing day charges, property taxes, and document fees. The lender provides an estimate of closing costs for prospective homebuyers.
So how can you save on these costs? Below are a few tips from MacDonald.
- Haggle with the seller. He or she may pay all or part of the closing costs.
- Nab a no-point loan. You may have to pay a higher interest rate, but if you are strapped for cash and can qualify for a higher interest rate, you may find this type of loan can significantly reduce your closing costs.
- Grab a no-fee loan. Although the fee is usually wrapped into a higher rate loan, it does offer one advantage – you get to save on the amount of cash you would need up-front.
- Secure seller financing. These loans typically avoid the traditional fees or charges imposed by lenders.
- Shop ’til you drop for the best deal. Every lender has its own unique fee structure; you are bound to find one that works for you.
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