Photo of two people negotiating for the final cost of the home.

Can I Negotiate the Closing Costs?

If you’re thinking about purchasing your first home, you might be surprised when you discover that the costs of owning a property include more than simply the house itself. You’ll also need to make a down payment and pay to have the home inspected and appraised.

After you’ve paid your upfront costs and are ready to close on the sale of your house, you’ll need to account for closing costs. However, you may be asking if closing costs are negotiable.

When purchasing a house, you may be able to negotiate closing costs with the seller and have them cover some of these fees. In this article, we will go over which mortgage closing costs are negotiable and how first-time home buyers may get started.

Can You Negotiate Closing Costs?

Closing costs are the fees you pay to your lender to process the real estate transaction. These expenses include origination fees, appraisal fees, title searches, taxes, and any other costs spent throughout the home-buying process.

You will pay your closing fees when the seller transfers the property title to you. The overall amount you owe will be determined by a number of factors, including the sale price of your home. Closing costs, on average, range from 3% to 6% of the entire loan amount.

These closing costs are often negotiable. You may ask the seller to cover some of it, but it’s still a substantial sum to pay up. If you’re provided with a figure that’s higher than you expected, you don’t have to pay it right away. You can lower your closing costs by comparing fees and other charges with your lender, real estate agent, and seller.

Which Mortgage Closing Costs Are Negotiable?

Negotiating your closing costs might save you a lot of money, but not all charges are negotiable. So, before approaching your lender, it’s a good idea to understand which fees are negotiable and which aren’t.

Borrowers, for example, have a lot of leeway in negotiating mortgage conditions and any lender fees. In comparison, any costs levied by the government or any third-party provider are more difficult to negotiate.

Negotiable Fees
  • Homeowners insurance: When you buy a residence, you must get homeowners insurance. Your lender wants to guarantee that their financial investment is safeguarded in the event of a fire or natural calamity. You may, however, shop around and check rates from several providers to ensure you’re receiving the best bargain available.
  • Discount points: Discount points are a one-time fee paid in return for a lower mortgage interest rate. This is often 1% of the overall loan amount, and because 1 point equals 1%, you’ll pay $1,000 for a $100,000 house. If you want to save money upfront, apply for a lender credit, which requires you to pay less in return for a higher interest rate.
  • Origination fees: An origination fee supports the costs of loan underwriting. This charge is typically 1% of the overall loan amount, however, the precise amount varies per lender. You can always ask your lender to reduce or remove these fees.
  • Loan application fees: The loan application fee is a one-time payment charged by your lender for processing and underwriting the loan. This price is negotiable, especially if your lender has charged you several other fees.
  • Real estate commissions: Closing costs will also include the commissions paid to the buyer and listing agents. Typically, both the seller and the buyer’s agent are paid by the seller from the selling profits.
  • Title insurance: When you buy a home, you must do a title check to guarantee that you have a clean title. Consequently, you must pay for the title insurance, which protects your lender if someone claims they have a right to the property. You can negotiate with your lender to recommend that they choose a more affordable title company.

How To Negotiate Closing Costs

When making a significant purchase, it is your obligation to negotiate the best deal possible. Your lender will not give you lower fees, and the seller will not offer to step in and assist pay for closing expenses unless you request it.

Work With Your Lender

Following the completion of a mortgage application, your lender is obligated to provide you with a loan estimate document. This form breaks down how much you’re paying to take out the mortgage. Go through this form to ensure you understand the fees you’ll be required to pay.

You may begin the bargaining process once you understand the costs your lender charges you. If your lender charges you different fees, ask that some of them be deducted from the final amount.

Compare your current rates and fees to the offers you received from other lenders. Inquire with your lender about your alternatives; they may not be able to eliminate all costs, but they will most likely be prepared to compromise on some.

Ask The Seller

You could ask the seller to pay for the title transfer fee or other fees. These are called seller concessions, and they can be a powerful way to save on your closing costs that are negotiable.

In a competitive housing market, it can be more challenging to convince the seller to contribute to closing costs. And you don’t want to do anything to jeopardize the purchase of your new home.  

When is the Right Time to Negotiate?

One of the most critical parts of any negotiation strategy is timing. You must understand when it is appropriate to ask for what you want and when it is best to wait.

You may be able to take advantage of seller concessions and have the seller agree to cover part of the negotiated closing costs in some situations. In a competitive market, however, buyers may find it difficult to negotiate closing expenses. In addition, if you’re in a seller’s market, the seller is unlikely to contribute to your closing costs.

You’ve realized that it’s possible to negotiate your closing costs and save money on the purchase of your property. However, your capacity to negotiate will be determined by the market and your level of leverage.

Before purchasing a property, be sure you have the funds to cover the closing costs. You’ll have peace of mind knowing that you can pay the bills if required, and whatever money you save will be worth investing in renovations or add-ons.

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