As a real estate professional, your clients turn to you to help them navigate an often emotional and complicated process. They trust your guidance and insight as they make what is often their most significant investment. Investing in a home can be scary for many, especially first-time buyers. It’s easy to be overwhelmed by how much money a home costs, especially when the added costs of purchase begin to enter the mix.
Many homebuyers are surprised by how quickly closing costs can add up. According to the National Association of Realtors (NAR), the average closing costs for a single-family home rose by 13.4% in 2021. While closing costs are an inevitable part of the real estate process, there are ways to help reduce these costs.
Closing Day and Closing Costs
While home buying fees can vary, below are some of the most common closing costs homebuyers can expect to pay:
- Appraisal fee: When applying for a mortgage, the lending company requires the property to be appraised. Buyers pay the appraisal fee.
- Attorney fee: If the buyer uses an attorney when purchasing a home, this fee is included in the closing costs.
- Home inspection: Home inspection fees are considered closing costs.
- Origination fee: A mortgage lender will charge an origination fee for creating a loan.
- Title insurance: Borrowers are required to purchase title insurance to protect the mortgage lender. Title insurance is required in case a claim is filed about an issue that happened at the property before the sale.
- Title search: When a property is transferring ownership, a title company conducts a title search to confirm no outstanding issues with the home’s title. The most common issue is often a tax lien.
- Underwriting fee: This fee includes the lender’s process of verifying a borrower’s eligibility.
Ways to Reduce Closing Costs
If your clients feel overwhelmed with homebuying costs, you can help provide solutions on lowering the closing costs.
Encourage your clients to shop around
When your clients are beginning their home search, the first step is to often to select a mortgage lender. Encouraging your clients to shop around for a mortgage lender can help them choose the lender with the lowest closing costs. Rates, fees and requirements vary by lender, so your client can select the lender that makes the most sense for their financial situation.
Partner with a lender that offers discounts
As a realtor, your network can be your greatest asset. Partnering with a mortgage lender and referring your clients to them is one way to lower closing costs for your clients. These benefits could include waiving or discounting the origination, application, and underwriting fees, which all add to the closing costs.
Negotiate with the seller
As a real estate professional, it’s your job to advocate and negotiate on behalf of your client. One way to potentially reduce closing costs is to negotiate these expenses with the seller. If the home has been on the market for a while, making an offer with a clause that the seller pays some of the closing costs could appeal to the seller. However, this strategy usually works best in a buyer’s market.
Look into down payment assistance programs
Down payment assistance plans are another way your clients can lower closing costs. Depending on your buyer’s unique situation, these programs can be available locally and statewide. Resources to look into include:
- Programs through the city or county
- Your state’s housing finance authority
- S. Department of Housing and Urban Development(HUD) for local homebuying programs.
Consider no-closing-cost mortgage options
No-closing-cost mortgages don’t completely negate the closing costs; however, these costs can be calculated more creatively. A no-closing-cost mortgage means that the closing costs don’t all need to be paid upfront, but they can be paid over the loan’s term. When assessing these options, it’s important to look into the pros and cons, to determine if this makes the most sense for a buyers’ financial situation.
No-closing-cost mortgage payment options include:
- Rolling closing costs into the loan amount. The closing costs become part of the mortgage principal and are part of the total amount the buyer borrows.
- Paying a higher interest rate. This option means the lender will waive the closing costs, but charge a higher interest rate to recoup the loss of closing costs.
Additional Tips to Guide Your Clients Through Closing Day
Remind your clients to attend the closing with a valid form of personal identification, a certified cashier’s check, and any other items you and your team recommend.
Closing day is notorious for the amount of paperwork involved, so it’s essential to remind your clients to read through these documents carefully to ensure they are error-free and they’re clear on the terms.
Explain to your clients exactly what will happen on closing day, and maybe even give them a checklist of documents to help the day go more smoothly and give them confidence.
How Keller Home Loans Can Help
At Keller Home Loans, we care deeply about the home financing and buying process. We know in today’s ever-changing real estate market, you need partners you can depend on to guide your clients through the home buying process.
We understand the unique needs of real estate agents and homebuyers. We are committed to helping people achieve their home ownership dreams, and we continue to work to create a better homebuying process that aligns clients, real estate professionals, and technology systems. Let’s partner to find the right mortgage product for your client’s next home-buying experience.
We can offer:
- A fast approval process
- Exceptional customer service
- Competitive rates and terms
Help your clients begin their home search by getting pre-approved for a home loan. Applying now will help start their homeownership journey. Contact us today to learn more.
