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How To Get Closing Costs Waived: Is It Possible To Avoid Or Negotiate Them?

Emma Tomsich4-minute read
March 03, 2022

Whether you’re a first-time home buyer or you’re moving from one house to the next, closing costs are one thing that can put a damper on the excitement of purchasing a new house. However, there are still plenty of reasons to get excited about purchasing your new home – and lots of ways to save!

Luckily, there may be ways to reduce your closing costs. Read on to learn more about whether you can waive or reduce closing costs, and how.

What Determines The Cost Of Closing Costs?

Closing costs on a loan can be up to 3% – 6% of the total home price. These fees, which are outlined to a home buyer in a closing document 3 business days prior to closing, must be paid on closing day.

Because closing costs are paid at the end of the home buying process, they can be easy for buyers to forget about. While many home buyers save for months or even years to afford their down payment, they don't always make sure they also have enough saved to cover their closing costs as well.

So, as you continue through the process of buying a house, consider what your potential closing costs will be and whether you can afford them along with your down payment.

Here’s a list of the most common closing costs to pay as a buyer:

  • Appraisal fee
  • Attorney fees
  • Closing fee
  • Courier fee
  • Credit report and monitoring fees
  • Discount points
  • Escrow funds
  • Flood certification
  • Homeowners insurance
  • Mortgage insurance premium
  • Origination fee
  • Prepaid interest
  • Private mortgage insurance
  • Property taxes
  • Rate lock fee
  • Recording fee
  • Survey fee
  • Title insurance
  • Title search
  • Transfer tax
  • USDA Guarantee fee
  • VA funding fee

With all these fees, it can be hard to estimate the final price of your closing costs. To begin, your final closing costs will depend on a variety of factors, including where you live and what type of loan you’re getting.

When you apply for a mortgage, the Loan Estimate document you receive will highlight your costs at closing and have an approximation of your total closing costs. While this number might not be the exact sum of your final closing costs, it will give you a good idea of how much you should be prepared to pay during the closing process.

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Can You Actually Avoid Closing Costs Completely?

At this point, you’re probably wondering whether closing costs can be eliminated or avoided completely. Because most closing costs cover services that are necessary to the mortgage application and home buying process, it’s almost impossible to cut all closing costs completely.

In fact, the only way to “avoid” closing costs is to roll them into your mortgage with a no-closing-cost mortgage. Despite what the name suggests, this option still isn’t a true waiving of closing costs. One way or another, you’ll have to pay them. In addition, there are trade-offs to taking this route, such as added interest, which can cost you more than if you’d paid your closing costs in cash at closing.

But remember, there are pros and cons that come with many money-saving methods. As a homeowner, it’s important to evaluate these benefits and drawbacks and decide what works best for you and your financial situation. And while it may be impossible to completely get rid of closing costs, there are many strategies homeowners can use to reduce their costs at closing.

What If I Can’t Afford Closing Costs?

Luckily, there are a few options available to help home buyers pay for closing costs. Consider these options, and conduct additional research to learn more about each suggestion. Remember to think about your unique financial situation and choose an option that makes sense for you.

Lower Your Down Payment

One way buyers can lower their closing costs is by reducing their down payment. When a homeowner reduces their down payment, they can use some of their money to pay for closing costs.

Keep in mind that lowering your down payment means less money going to your home. If you want to put less down, you’ll have to talk with your lender to be certain you’re still making a large enough down payment. Conventional loans require you to pay private mortgage insurance (PMI) for down payments less than 20%, with most loans requiring at least 3% down.

Pay A Higher Interest Rate To Use The Rebate To Pay

Buyers can also choose to pay a higher interest rate to save on their closing costs. In general, loans with lower interest rates come with higher processing fees. By paying a higher interest rate, the lender may provide a homeowner with a rebate to their fees at closing.

Keep in mind that getting a higher interest rate in exchange for fewer fees may cost you more money over the length of the loan.

Negotiate Closing Costs

As a buyer, you have the power to ask questions and reduce the closing costs you pay. When negotiating your closing costs, there are a few options available to help you lower your closing costs. Start by talking with your lender and the seller, then compare the fees and service charges from other lenders.

Refinance Your Closing Costs Down The Line

Another alternative to cutting your closing costs is refinancing. As a homeowner, you might be able to refinance into a lower rate down the road, which could ultimately reduce your closing costs.

As you continue to look for ways to save money on your closing costs, consider your financial situation, the economy and the housing market. If you’re worried about affording closing costs, ask yourself whether this is the right time to buy. It can be a difficult decision to make, but if your finances are your main priority, waiting to buy could be a smarter decision that saves you more money in the long run.

The Bottom Line: While You Can’t Waive Closing Costs, You Can Lower Them

As you continue moving through the stages of the home buying process, don’t be afraid to seek out ways to save. And remember that while closing costs can’t be eliminated, they can be negotiated down.

Learn more about other ways to save on home buying fees before you sign your final purchase agreement.

Emma Tomsich

Emma Tomsich is a student at Marquette University studying Corporate Communications, Marketing and Public Relations. She has a passion for writing, and hopes to one day own her own business. In her free time, Emma likes to travel, shop, run and drink coffee.