Can Santa Cruz, CA Homebuyers Lower Their Closing Costs?

Of course! If you are a first time homebuyer, it might be a bit overwhelming to go through the list of closing costs, but you should know that most of these fees and charges are not set in stone and that there are a few things you can do to significantly reduce your closing costs. Here are some practical tips for homebuyers like you, so you can get a much better deal as you finalize your home purchase:

1. Shop Around for Lenders and Check Out Their Rates

The rates that are offered by various lending institutions vary, so the best way for you to get the best rate is to take some time to shop around and check out rates from various lenders. The difference in interest rates range from one-eighth percent to a half-percent. This may seem to be a very small difference but, on a $300,000 loan, a half-percent equals to over $1,000 in savings per year. Based on a recent study, a homebuyer can save up to $1,500 by getting one extra rate quote when applying for a home mortgage and $3,000 or more by getting five quotes from different lenders.

2. Request for a Good Faith Estimate (GFE) Form

For first time homebuyers, speaking with two or more lenders can get pretty confusing because they do not follow a specific list. Without a standard list, you are likely to see different terms when comparing quotes from several lenders, making it difficult to assess which lender is offering a better deal. But don’t worry. There is a document called Good Faith Estimate (GFE) form which lists every single fee in a standard manner, and you can request one from each of the lenders you are considering. With this form, you are able to compare all the closing cost fees apples to apples.

3. Review Every Cost with the Lenders

Every homebuyer needs to be able to understand each closing cost fee. This enables you to negotiate with your lender, by either lowering the cost of the fees or taking certain unnecessary fees off the list. So, don’t hesitate to ask the lenders to walk you through the list and explain to you what each fee is all about. Keep in mind that while some of the third party charges are non-negotiable, such as appraisals and credit report fees, other fees are negotiable, such as title insurance, legal fees, and rate lock fees. in addition, there are fees charged by lenders which can be taken out of the list upon your request, such as application fees, underwriting fees, and loan processing fees. So, if you are not familiar with some of the fees, feel free to ask the lenders to explain these to you in detail and request them to take out from your closing costs those fees which seem vague or unnecessary.

4. Let the Lenders Know That You are Evaluating Your Options

Instead of just comparing one lender’s offer against another, you can also let the lenders know that you have more than one option and that you are considering the best rates. If you want to get the best deal, it would be to your advantage to encourage competition among the lenders. Let them know what the others are offering and ask them if they can match it. Knowing how competitive the market is, they are most likely to give you a much better offer.