How can you save money on closing costs?

You  get your Truth in Lending Statement from the bank and it says your closing costs are WHAT???? Yes, that piece of paper can certainly be a shocker, but here are a few ways that you can save thousands on closing costs, and try to relax, that number is intentionally high.

The bank estimates a number of fees at worst case scenario, such as your attorney costs- so the first thing to do is to look at those figures.  They may not coincide with your legal fees.  They may also include POC fees. ( P.O.C. means Paid Outside of Closing)  and that most likely, you have paid aready, so subtract those fees off the total

Did you know that the actual day of the month that you purchase your home also affects your closing costs?  That's right!

• Tip: 1:  If your mortgage payment will be $4,000 for example,  the day that you close can affect your closing costs by up to $4,000. If you know that the bank collects mortgage  payments for the month ahead, then it would make sense to you that if you close on the 2nd of the month, the bank (in this example) would require $3733. for the remainder of the month at closing. If you closed on the 30th of the month before, that same line item charge would be less than $134.  There's over $3,600 savings just  because you closed on your purchase 3 days earlier.   

You may have heard that you are supposed to close at the end of the month- now you know why. A few times, I have had clients that needed to close in the first few days of the month, and they would have incurred that big expense. What I will tell you is sometimes, but not always, you can negotiate  with the bank to NOT take this amount at closing. The result would be that your first mortgage payment would be due  the 1st of the next month, instead of the first of the following month .

Then, there are pro-rated taxes. The bank likes to have a two month share of taxes in escrow, even though the taxes are included in your actual payment, which leads me to my next closing cost cutting measure:.

• Tip: 2:  Each town collects taxes from the bank in their own manner- some collect every 6 months, some collect every 3 months, and here's where it can get somewhat complicated.  If you are closing on a home in the most inopportune month of the cycle in a town where tax collections are made from the bank every six months,  the bank will require more of an escrow (holding account) at closing.

In some cases , there  can be  7 months worth of taxes to  include in your closing statement.  Closing on the same house in a different month  will only cost 3 months of taxes in advance. If the monthly taxes work out to be $500 per month, which is still fairly cheap, your timing alone on this item alone can save you $2,000  in this minimal scenario.  When every penny counts, speak with your mortgage broker to discuss the tax collections and anticipated closing costs for the town that you are planning to move in.  Most realtors do not know about this cost-saving measure, and to be honest, I only found this out about 15 years ago- so talk to your mortgage broker or your attorney regarding  when is the most cost effective time to close on a home in the town(s) that you are interested in moving to.

• Tip: 3: Fuel costs.  If the home you are purchasing has oil heat, or propane heat, there will be a storage tank for the fuel on the property. You re-imburse the seller at market rates for the fuel that is left in the tank. So kindly ask the seller NOT to fill up the fuel tank(s), and only have the minimum delivery if they are low. New clients can often work out a deal with a fuel company, and I can almost guarantee you that the price you pay for fuel will be less than what you will need to re-imburse the seller for. Depending on the size of the tank, your estimated  re-imbursement costs can save you upwards of $500 at closing.

As always, consult professionals regarding the purchase or sale of your home. We are available 7 days a week, nights and weekends, and you can even set up an appointment online for the date and time that's most convenient for you.