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You’ve gone all the way through the mortgage process and it’s time to close your loan. What are all these closing costs and why do they change?

And we get it. Closing costs are a turnoff. If everyone had a bunch of money to bring to the table, we wouldn’t need mortgages. What can you do to help keep the costs down? We have some tips.

What Goes into Your Closing Costs?

When you close your loan, you often have to bring a certain amount of money to the table. Here are some of the variety of things this payment at closing covers:

  • Taxes and homeowners insurance paid into an escrow account
  • Interest points purchased to bring down your rate
  • Title transfer fees
  • Additional appraisal costs, i.e., a property survey
  • Homeowners association dues
  • Real estate agent fees

Why Do They Change?

When you apply for your loan, you get what’s called a Loan Estimate (also known as a Good Faith Estimate or GFE). Unfortunately, it’s just that, an estimate. Lender fees and rates are pretty tightly controlled in terms of how much they can change between the GFE and closing. However, third-party fees, including appraisal, home inspection and tax certification can go up as much as 10%.

A tricky issue can arise in a refinance scenario. If your appraisal comes in lower than expected, your loan-to-value (LTV) ratio may be higher. A change in your LTV could mean you have to pay more in prepaid interest points at closing in order to lower your payment and get a certain interest rate.

The amount for the tax certification or the amount needed in prepaid escrow could also change and cause upfront costs to push up. If there are any homeowners association dues, a lender wouldn’t necessarily know about those until it got closer to closing time.

How Can You Keep Closing Costs Down?

What can you do if you still want to close the loan, but costs are becoming prohibitively expensive? You have a few options here.

You could negotiate concessions from the seller into the deal that would help pay for closing. A seller that’s looking to offload the property may be open to some give-and-take.

In a modification of this strategy, you could negotiate seller’s concessions in exchange for paying a higher price for the home. You would effectively be rolling your closing costs into the mortgage amount to be paid off over the life of the loan instead of worrying about it upfront.

Finally, taking a slightly higher rate may allow your lender to give you credits to cover part or all of your closing cost. Doing this would allow you to still close the loan without having to spend so much money up front.

That about closes out this article on closing costs. Still got questions? Leave us a note in the comments.

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This Post Has 12 Comments

  1. We’ve run into a serious problem where our long time rental is being sold out from under us and we have 30 days to vacate. Lease went month to month when property manager went out of business. Anyhow, not only do we not have funds to close on a new house, but it would take 45 days to do so if we did have the funds. We are a family of four and about ready to be put out in a foot of snow in NE Arizona. (Nasty storm just hit).
    Wife is a teacher and I have just gotten over a bout of medical issues and starting work again. We have no real savings as this vacate issue blind sided us.
    Other than my wife’s near death stage four cancer a few years ago, this is the worse emergency we’ve even been in. Does Quicken offer any help with rolling our closing costs into a loan? I was told that new laws prohibit us from even borrowing funds if anyone we knew had any to spare…. But, very seriously, I would not be typing this if we were not at wits end and totally panicked. Good credit rating and making $36K year as a teacher with me working on a realty license and playing as realty company handyman in the meantime.
    HELP!?
    Thanks.

    1. Hi John:

      That sounds like a difficult situation and I want to start by wishing you the best of luck! I don’t know what laws you’ve been told about, but you can borrow money if you have income and assets. That’s how you pay it back, so what you’re being told doesn’t make sense. We do offer the ability to roll closing costs into your mortgage and depending on the loan options you qualify for, there are certainly low and even no down payment options that may be available. In terms of the timing, it does take longer with a purchase loan because you have to find the house and get an appraisal, etc. My first thought is that renters often have certain legal rights. Depending on state laws, you may have options, but in order to go over those, you need to talk to an actual attorney in your area. I’m also going to recommend you speak with one of our Home Loan Experts who can go over your situation more thoroughly and discuss any and all options you may have to finance a home. You can reach them at (888) 980-6716. I hope this helps somewhat!

  2. Hi,

    Does Quicken Loans work closely with Realtors through the deal?

    I’m a Realtor and I’m always trying to find the best options for my clients.

    Thanks,
    Amy Cruz
    Realtor
    321-316-8111

    1. Hi Amy:

      We have a company that facilitates a lot of our work with realtors. I’m going to have someone from our friends over at In-House Realty reach out to you with more information.

      Thanks,
      Kevin Graham

    1. Hi Carol:

      That depends on the loan and what you’re trying to do, but it’s certainly something we do. If you go through Rocket Mortgage, you can put in your goal, your income and asset information and at the end get a custom mortgage solution tailored to meet your needs. I highly recommend running through it and seeing if we have an option that works for you.

      Thanks,
      Kevin Graham

  3. Hello,

    I am shopping around for a mortgage. I am a first time home buyer, looking at fixer uppers. I looking for a loan that will allow me to pay less up front so that I can fix the property up. Looking to either roll closing costs within the loan or within the negotiation reduce the costs then. What loan would be appropriate to these needs? Thanks.

    1. Hi Jennifer:

      I suggest checking out Rocket Mortgage. You’ll be able to go through and get your preapproval done online. There are also options to adjust costs and fees to meet your needs. If you prefer to get started over the phone, please call 800-251-9080. Don’t hesitate to reach out with any other questions.

      Thanks,
      Kevin Graham

  4. I have bout home with a finance price of $119.640 the letter that the Department Of Insurance and Financial Services has all the reached them to day Kristina was on the chat Agent Eric F is how I’ve been working with NorthPointe Bank Routing#/ Brokerage Account

    1. Hi John:

      I’m going to remove the personal information in this post, but I’m going to have someone reach out to you to see if there’s anything we can do to help you.

      Thanks,
      Kevin Graham

  5. I RECD. A CARD FROM YOU YESTERDAY, PROPOSING THAT I REFINANCE MY VA LOAN. I’VE HAD MY LOAN FOR A LITTLE LESS THAN 2 YEARS (AUGUST 2014) and I wanted to keep my “total payment” below $1,000.00. Taxes and escrow keep edging up, and I’m now @ $1,015.00 per month total. My question is would it be practical for me to take the 1% interest rate reduction to reduce my monthly payment by about $75.00, and still pay the closing costs associated with refinance? Also refunding the current escrow could amount to about $4,000.00. I currently have some pretty high medical copay costs associated with my cancer treatment, that just last week I was pronounced CANCER FREE! Reply A.S.A.P.
    DTW.

    1. Hi David:

      First, congratulations on your cancer free diagnosis. That’s a big deal!

      As far as refinancing, I’m going to have someone reach out! Every situation is different. We can see if the cost makes sense for you.

      Thanks,
      Kevin Graham

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