Home Loans
Can I Minimize Or Avoid Closing Costs
(presented by www.refinance-refinance.net - mortgage lenders)
By Ben Afzal
Basics
The usual way people avoid or minimize their closing costs is to have the costs included in their loan.
Rather than paying these costs up front the borrower pays the costs through the loan over time.
This allows a buyer to save their cash up front. For a buyer getting 100% financing this helps them have very little in the way of cash costs when getting a property.
How To Do This
The closing costs are usually added into a loan.
For example, a $300,000 sale may involve $5,000 in closing costs. If a borrower is getting a 100% loan of $300,000 they will still need to pay the $5,000 in closing costs out of pocket.
To avoid this a seller may change the price to $305,000 and credit the buyer back $5,000 towards closing costs.
In this way the seller still nets their $300,000 price and the buyer doesn’t have to pay the $5,000 in closing costs out of pocket.
Closing Cost Limits
Lenders that allow closing costs to be part of the loan usually have limits on the amount of closing costs they will allow to be covered.
For example, many lenders will allow up to 6% closing costs. This is a proportion of the transaction amount. For example, on a $300,000 transaction this is $18,000 in closing costs that can be covered as part of the loan ($300,000 x 0.06).
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