young couple standing outside of their new house
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 10 Comments

  1. 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.

    Amy Cruz

    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.

      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.

      Kevin Graham

  2. 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.

      Kevin Graham

  3. 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.

      Kevin Graham

  4. 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.

    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.

      Kevin Graham

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