Negotiate Your Closing Costs

At the end of the home-buying process, you will be faced with closing costs, the fees due at signing required to complete a home sale. Closing costs can be expensive, but some of those fees may be negotiable—and you can ask the seller to cover some or all of them.

Veterans and military members in particular can tap into closing costs savings. When you buy with a VA loan, there are certain closing costs that the VA does not allow home buyers to pay. These include pest inspection fees, mortgage broker fees, and more.

Title companies, attorneys, inspectors, and other third parties may also offer military discounts.

To be sure, there’s no getting around closing costs, no matter the financing path you choose. But you can take a few different approaches to tackling these costs and fees when it’s time to wrap up your home purchase.

Check the market temperature

The nature of the housing market may dictate whether the buyer or the seller picks up various closing costs.

If it’s a buyer’s market—a bit cold and homes aren’t selling well—sellers may be more willing to bargain and take on some closing costs.

If it’s a seller’s market—the market is hot and homes are selling quickly—the seller has the advantage and little incentive to give the buyer a break.

However, you shouldn’t accept any fishy-looking fees without asking about them first.

Which closing costs are negotiable?

When you apply for a loan, your lender must provide a good-faith estimate of fees due at closing.

This is a very useful tool, but bear in mind these are estimates—not guarantees. Compare the GFE to the final closing costs statement and the HUD-1 settlement statement to look for big differences.

Some fees are generated by third parties and typically don’t change very much, no matter where you find your loan. Then there are additional expenses you can’t control, like taxes and government fees.

Negotiable fees are generally found in the 800s section of the GFE. They may include the following:

• Title insurance: The lender will recommend one, but you don’t need to accept it. You can shop around, compare fees, and go with the one that suits you best. However, you can’t have this waived.
• Application fee: Some loans have an application fee. Ask your lender if it will waive or credit this fee toward closing costs.
• Miscellaneous fees: Ask exactly what these are for, especially if they are high.
• Courier and mail fees: With almost everything being digital, your lender should provide evidence these fees were necessary.
• Discount points: These increase your closing costs but reduce your interest rate. If you have discount points and your closing costs are too high, you may want to eliminate them. Talk it over with your lender and be sure to figure out the new monthly mortgage payments if you do.

It’s your right to question anything on your HUD-1 and GFE documents, so do ask questions if you believe a cost is too high or doesn’t make sense.

Seller concessions

So how much can you ask the seller to pay? It depends in part on the type of home financing. You can typically ask the seller to pay up to 3% toward your closing costs in a conventional transaction and 6% in an FHA purchase.

The VA allows sellers to pay all of a buyer’s mortgage-related closing costs and up to 4% toward prepaid expenses and other concessions.

Sellers may want to see you increase your offer on the home to offset their concessions, but keep in mind the property will have to appraise for that higher amount.

If a seller won’t budge, another option may be to have your lender cover your closing costs. Lenders will typically give the buyer a higher interest rate and use a lender rebate to pay those fees.

Don’t get intimidated by closing costs

As you review your closing costs, be your own advocate. Always make sure you receive a thorough explanation of any fees that seem unusual, unnecessary, or just too costly.

Go over these documents in detail with your real estate agent, and plan your closing cost strategy before making an offer.

NMLS 1907 (www.nmlsconsumeraccess.org) Veterans United Home Loans is not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency; does not reflect DOD endorsements. Equal Opportunity Lender. 1400 Veterans United Drive Columbia MO, 65203.

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