Negotiating Closing Costs: A Guide to Saving Thousands

You've saved for your down payment, gotten pre-approved, and found your dream home. But then you’re blindsided with closing costs totalling an extra $10,000-$15,000. It happens all the time. Most first-time buyers are unaware of the extent of closing costs.

Here's the truth: closing costs typically run 2-5% of your purchase price, but you can negotiate many of them. Knowing your options can save you thousands of dollars.

Keep reading to learn more about closing costs and explore your options to reduce them.

Key Takeaways

Closing Costs Run 2-5% of Purchase Price:

For a $300,000 home, expect closing costs of $6,000-$15,000, in addition to your down payment.

Not All Fees Are Negotiable:

Fees, such as government fees and taxes, are fixed; however, lender fees, title services, and certain third-party charges may be negotiated.

Sellers Can Pay Your Closing Costs:

Some loan programs allow sellers to contribute 3% to 9% toward your closing costs.

Shopping Around Saves Thousands:

You can choose your own title company, home inspector, and other service providers ⸺ you don't have to use the vendors lenders recommend.

The Loan Estimate Shows All Costs Upfront:

Your Loan Estimate breaks down all closing costs for your loan. Review it carefully and don’t be afraid to question any fees.

💡 Pro Tip: Lower closing costs start with a competitive mortgage offer. Upload your Loan Estimate to Fincast and let vetted lenders compete to beat your rate and fees. Many lenders may reduce origination charges and other costs to win your business.

What Are Closing Costs? 💰

Closing costs are fees required to complete your home purchase, paid at closing when ownership transfers. They're broken down into several categories:

Lender Fees (Negotiable)

• Origination Fee: Average 0.5%-1% of the loan amount for processing your mortgage

• Discount Points: Optional upfront payment to lower your interest rate (1 point = 1% of the loan)

• Application Fee: $200-$500 to process your application

• Underwriting Fee: $300-$750 to review and approve your loan

• Processing Fee: $300-$900 to gather and process your documentation

Third-Party Fees (Partially Negotiable)

• Appraisal: $500-$1,000 to determine home value

• Home Inspection: $300-$500 for property condition assessment

• Credit Report: $25-$50 to pull your credit report

• Title Search and Insurance: $300-$2,500 to verify ownership and protect against claims

• Survey Fee: $300-$500 to map property boundaries

• Attorney Fees: $500-$1,500 in states requiring real estate attorneys

Prepaid Costs and Escrow (Non-Negotiable)

• Homeowners Insurance: First-year premium paid upfront

• Property Taxes: 2-6 months prepaid into an escrow account

• Mortgage Insurance: First month's premium, if applicable

• Prepaid Interest: Interest from the closing date to the first payment

Government Fees (Non-Negotiable)

• Recording Fees: $20-$250 to file deed with the county

• Transfer Taxes: Varies by state and locality

Which Closing Costs Can You Negotiate? 🤝

Highly Negotiable:

• Origination fee: Ask lenders to reduce or even waive it

• Application fee: Many lenders waive this to stay competitive

• Points: Negotiate whether you buy points to buy down your rate

• Title insurance: Shop multiple companies; rates can vary more than you think

• Home inspection: Get quotes from 2-3 inspectors to compare pricing

Sometimes Negotiable:

• Underwriting fee: Some lenders will lower or adjust this fee

• Survey: May not be required if a recent survey is available

• Attorney fees: Rates vary widely — shop for competitive pricing

Not Negotiable:

• Government recording fees and transfer taxes

• Property taxes and homeowners insurance

• Appraisal fee: The lender’s appraisal company sets the fees, so they are non-negotiable. But costs can differ between lenders, depending on the appraiser they use.

7 Ways to Reduce Your Closing Costs 📉

1. Compare Lenders and Negotiate Fees

Get Loan Estimates from 3-5 lenders and compare Section A (origination charges). Show competing offers and ask your preferred lender to match or beat them.

2. Ask Sellers to Cover Closing Costs

FHA allows sellers to pay up to 6% of the purchase price toward closing costs. Conventional loans allow sellers to contribute 3-9%, depending on the amount you put down on the property. In buyer's markets, sellers are often willing to contribute.

3. Shop for Title Insurance

Lenders can recommend title companies, but you are also free to choose your own. Get quotes from 2-3 companies to save money.

4. Close at Month-End

Lenders charge prepaid interest from the closing date to the end of the month. The later you close in the month, the less prepaid interest you’ll owe at the closing.

5. Ask for Lender Credits

Some lenders offer credits toward closing costs in exchange for a slightly higher interest rate. Ensure the tradeoff is worthwhile in the long run, considering how long you plan to stay in the home.

6. Bundle Services

Some companies offer package deals that include title insurance, escrow, and other related services. Ask if bundling saves money.

7. Review and Question Every Fee

Don't accept fees at face value. Ask lenders to explain every charge. If something seems high or duplicated, question it.

How Fincast Helps You Minimize Closing Costs 🚀

Lower closing costs often start with competitive lender fees. The origination charges in Section A of your Loan Estimate are where lenders compete most aggressively, but many will provide competing offers based on your Loan Estimate.

Here's how Fincast works:

• Get pre-approved and receive your Loan Estimate

• Upload your Loan Estimate to Fincast

• Lenders compete to beat your deal

• Choose the lender with the costs and terms that make the most financial sense for your situation

Fincast makes finding the most competitive offer easy. With one Loan Estimate, you can have multiple lenders competing for your deal, which means potentially lower interest rates and fees for you — no credit pulls and no spam.

FAQs

1. How much are closing costs on a $300,000 home?

Typically $6,000-$15,000 (2-5% of purchase price). Costs vary depending on the location, lender, and loan type. Use your Loan Estimate for an accurate breakdown of your costs.

2. Can I roll closing costs into my mortgage?

You can roll closing costs into the loan if you have sufficient equity or the home appraises for more than the purchase price. This increases your loan amount and monthly payment. FHA allows rolling the upfront mortgage insurance premium into the loan.

3. What's the difference between closing costs and down payment?

The down payment is your equity in the home (3-20% of the purchase price). Closing costs are transaction fees paid to lenders, the government, and service providers. Both are due at closing and are separate expenses.

4. Are closing costs tax-deductible?

Some are, such as points paid to lower your interest rate, and prepaid property taxes. Most other closing costs are not. Consult a tax professional for your specific situation.

5. When do I pay closing costs?

At closing, typically via wire transfer or cashier's check. You'll receive a Closing Disclosure 3 days before closing, which will show the exact amount due.

Bottom Line

Closing costs are a significant expense, but there’s room to negotiate. Understanding your costs and how to negotiate strategically can save you thousands.

You're ready to minimize closing costs when:

• You understand which fees are negotiable vs. fixed

• You've compared Loan Estimates from multiple lenders

• You're prepared to shop for title insurance and other services

• You've asked sellers about closing cost contributions

• You've questioned every fee on your Loan Estimate

Start by getting the most competitive lender fees —upload your Loan Estimate to Fincast and let lenders compete for your business.

Pro Tips (Save These!)

• Budget 2-5% of the purchase price for closing costs

• Compare Section A fees across lenders — that's where you save

• Ask sellers to contribute closing costs, especially in buyer's markets

• Shop for title insurance — you're not required to use the lender's company

• Upload your Loan Estimate to Fincast to reduce lender fees

• Question every fee — if it seems high or unclear, ask

• Close late in the month to reduce prepaid interest

• Negotiate origination and application fees most aggressively

Action Checklist

• Review your Loan Estimate carefully when you receive it

• Compare Section A fees across 3-5 lenders

• Ask lenders to explain and justify every fee

• Get quotes from multiple title insurance companies

• Shop for home inspectors and compare rates

• Negotiate with your preferred lender using competing offers

• Ask sellers about contributing to closing costs

• Upload your Loan Estimate to Fincast

• Review competing lender offers

• Choose the lender with the best combination of rate and fees

• Move forward knowing you minimized your costs!

👉 Ready to reduce your closing costs? Get your Loan Estimate, then upload it to Fincast to find the deal with the lowest costs.