If you’re like most people, you know that you’ll have to pay closing costs when you buy a home – but is there a way to lower them? Absolutely – and this guide explains.
How to Lower Your Closing Costs When You Buy a Home or Investment Property in Silicon Valley
Closing costs can really rack up. In fact, they usually total between 2 and 5 percent of your loan’s value – and if you’re buying a $750,000 property, that means your closing costs could range from $15,000 to $37,500. That’s quite a bit!
Fortunately, there are a few things you can do that may help lower your closing costs when you buy your next home, whether it’s an investment property or a home you intend to live in (or both). The first thing to do is carefully review your loan estimate form – the form you get from a lender that says what percentage you’ll owe for closing costs. If that percentage is too high, it’s always okay to shop for another lender. From there, you can:
- Negotiate with your lender
- Consider rolling closing costs into your mortgage
- Find first-time buyer assistance programs
- Ask sellers to cover some or all of your closing costs
Here’s a closer look at each.
Tip #1 to Lower Closing Costs: Negotiate With Your Lender
You can negotiate with your lender to lower your closing costs. You can also find out if there are some things you shop for, such as:
- Home inspections
- Title searches
- Title insurance policies
Tip #2 to Lower Closing Costs: Consider Rolling Closing Costs Into Your Mortgage
Many lenders will work with you to include your closing costs in your total loan amount. That means that your loan amount will go up based on your closing costs – but it also means that you don’t have to come up with the cash for closing all at once. One word of caution: Your monthly payments may increase a bit, and you’ll end up paying a little more for closing costs over time because of the interest associated with your loan.
Tip #3 to Lower Closing Costs: Find First-Time Buyer Assistance Programs
There are a number of first-time homebuyer assistance programs available, and your REALTOR® can help you find them. In fact, you don’t necessarily need to be an actual first-time buyer to use many of them; some programs only require that a certain amount of time has passed since you last owned a home. There are even special loan programs that require lower down payments, or that have special features for buyers with certain credit scores. You can talk to your real estate agent and your lender about the programs that may help you out financially.
Tip #4 to Lower Closing Costs: Ask Sellers to Cover Some or All of Your Closing Costs
Generally, sellers are allowed to cover some – or all – of a buyer’s closing costs. And in many cases, sellers offer to pay the closing costs when they want to sweeten the deal for buyers. You may be able to ask the sellers to take care of yours, too, which would save you some cash on closing day, depending on whether it’s a buyers or sellers market.
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