Closing costs are fees associated with the completion of a home loan and home buying purchase. The costs, for a buyer, usually include any lender fees, appraisal costs, and legal fees for the transfer of the tile and tax filing of your home purchase. Closing costs can be in the thousands—but don’t fret. You may be able to negotiate the fees and ask the seller to cover all or some of your closing costs. At the onset of speaking with a lender, they will also provide you with a general estimate so you can go into negotiations and financing with adequate knowledge.
Know Who Has The Upper Hand
Before you negotiate and make any requests of the seller, it is best to consider the current real estate market. If homes are selling quickly, then the seller holds the upper hand in the negotiations and will probably not be open to covering your closing costs. However, if the market is slow or the home you are interested in has been sitting for awhile on the market, then you may have the upper hand and more wiggle room for negotiation.
What To Negotiate For
If you have the upper hand in the negotiations, you could ask the seller to cover your closing costs. Depending on your loan program, just how much you can ask them to pay for may have restrictions.
- Conventional Loans: Up to 3%
- FHA Loans: 6%
- VA Loans: All closing costs plus up to 4% of other concessions
It is important to note that if you ask a seller to cover the closing costs that you should make a fair offer on the listed price of the home. This is a negotiation, not a discount clearance shelf. If you make an offer that is more favorable to you, the seller may decline your offer—even if no one else is interested in purchasing the home.
If the seller is not covering all or part of your closing costs, you’ll need to prepare for how you will be covering these fees. Some lenders may include the closing costs in the total of the amount being financed, may require your to pay out of pocket (or use funds that were gifted to you), or they may offer to pay your closing costs themselves as a promotional offer. Review all of your options—financing closing costs may require additional fees and promotional coverage of closing costs may work its way out in the form of higher interest rates.
Don’t be afraid to ask questions—you aren’t expected to know everything or even anything about buying a home. That’s our job!