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Reducing Closing Costs On Your Next Home Purchase

Monday, February 1, 2010 at 9:39am

The anticipation surrounding moving into your home can only be dampened by one thing: closing costs. Closing costs must be paid to your lender before you are allowed to officially move into your house. After shelling out money on a down payment, many people start to ponder whether there are any strategies behind reducing these costs. Road House Realty has summarized small ways to save money, and also things that you need to do to make sure you are not paying more than you should.

Lenders are not legally bound to reveal what your closing costs are upfront. This can be quite disconcerting, but they are required to give you a good faith estimate. The good faith estimate is usually accurate with a small margin of error. If the estimate and actual closing costs are largely different, it is mandatory that you ask for a proper explanation of why this occurred.

Many home buyers do not the obvious: shop around. Trying to shop for the lenders with the best rates and fees should be second nature. If you are patient and look around without settling on your first of second lender, your legwork can pay off. Especially now, lenders are vying for new business so the stiff competition between companies can actually land you a better deal. Closing costs average out to 3% to 5% of the home sale price. If you find lenders giving you numbers higher than this, you should not be working with that particular lender.

Lenders are known to try and persuade you to buy products of services that you may not need. Understand your situation and buy only what you need. Items such as credit insurance are often times included at no cost, and some lenders charge for this. Make sure you check first whether it is included or not.

Always ask questions. This cannot be stressed enough. If there is any language you don't understand or anything that doesn't make sense, ask questions. If you do not ask questions, chances are the language indicated hidden costs, or unusual items are disguised as extra charges. Always make certain you get an explanation for all items on the contract before you are obligated to pay for things that you didn't intend to.

Although not all lenders like to do this, you can always ask if the closing costs can be pro-rated or rolled into your mortgage payments. This can be a huge relief for home owners, especially after large down payments or purchasing a home that requires immediate investment or work. You will not lose anything by asking your lender to do this, only something to gain: a bit of “easing up” on your closing costs

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