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How To Pay Low Or No Closing Costs For A Home Mortgage Loan
By EchoBay Loans Staff Writer

Buying a home can be one of the most exciting times of your life, and it also happens to be one of the most expensive. Chances are, you're never going to spend as much money on anything else in your lifetime as you will be spending on your home. Not only do you have the purchase price of the house to consider, but you also need to factor in closing costs. Closing costs fall into three basic categories. These categories include the costs of getting a mortgage, the fees paid to city, county and state governments, and the costs you will incur with the transfer of ownership of the property.

With so many costs flying around you during the mortgage process, it's hard to keep track of what's what. Knowing which fees fall into what category will help you understand the closing cost breakdown.
The costs associated with getting a mortgage will include any application fees, loan documentation fees, loan origination fees, processing fees, prepaid interest, and lender's inspection fees. The costs that are paid to county and state government offices include prepaid property taxes, recording fees, and transfer taxes. The last category, the transfer of ownership costs, include items such as title insurance, a title search, legal fees, and the fees associated with conducting the settlement.

If you're a savvy consumer, you're going to want to try to get the best deal possible, and that means you're going to want to pay as few of these fees as you possibly can. There are a number of methods and techniques that consumers can use to lower or even eliminate the closing costs associated with their home purchase. One of the first steps towards paying little to no closing costs will be to look for a lender that doesn't charge exorbitant fees. While the lenders who charge $500 processing fees would love it if you would think that these fees are standard no matter where you obtain your home mortgage loan, the reality is that not all lenders charge these inflated fees. There are lenders out there who will not charge you processing, underwriting and document preparation fees. This is a huge step towards paying little to no closing costs, as it can take close to $1000 off of the total price of your home-buying experience.

Another way to go to the closing table with no initial out-of-pocket expense is to work with a lender who will allow you to roll part or all of your closing costs into the amount of the mortgage. While you're technically still paying for your closing costs, and you're actually paying interest on them, this does provide a solution for buyers who want to own their own home but are really limited as to the amount of cash they have available for closing.

Points can also be used to pay part of a buyer's settlement costs. But wait, you thought points were something you paid to get a lower interest rate, right? Actually, points work two ways. A buyer can pay for positive points, which would in turn reduce one's interest rate. However, a buyer can also opt for "negative" points, which would allow that buyer to receive a rebate that could be used towards the settlement costs of the loan. This would result in a higher interest rate, but would allow the buyer to buy a home with fewer initial out-of-pocket expenses.

Perhaps the best and most effective way to purchase a home with paying little to no closing costs is to simply ask the seller to pay them for you. If you're financing your home purchase with a conventional mortgage, the seller can pay for the non-recurring closing costs (such as the appraisal, lawyers fees, credit reports, deed recording, etc.) and the seller can contribute from three to six percent of the purchase price depending on the amount of money you will be putting down on the home. VA loans have little to no restrictions in regards to what costs the seller can pay.

This means that it is entirely possible for a person financing their home with a VA loan to go to the closing table without paying any closing costs at all; that is assuming that the seller agrees to pay all of the closing costs for the buyer. An FHA home mortgage loan works much the same way that VA loans do, in that the buyer can close while paying no closing costs, but FHA loans require the buyer to have at least three percent of the purchase price for the down payment.

There are also grants available to buyers that will allow the sellers to purchase a home without any down payment. These grants are usually paid by the seller, and in turn, the buyer will normally pay the asking price for the house so the seller is not really losing any money. There are also nonprofit organizations that will assist buyers in obtaining down-payment funds for their homes. Your mortgage lender, working along with your real estate agent, should be able to point you in the right direction if you qualify for any of these programs.

To minimize the costs you will have to pay at closing, use a combination of these tactics. Find a lender that does not charge inflated mortgage-related fees and negotiate with the seller so that they can pay the closing costs that will be incurred during the purchase process. If the seller refuses to pay closing costs, then you may want to look into paying a higher interest rate in exchange for lower up-front costs if you are severely restricted as to the amount of cash you have available for your home mortgage loan closing.


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