New construction comes with many creature comfort and function features. The home is built with the most up-to-date standards and often comes equipped with some amazing amenities, courtesy of the builder. Newly built homes also come with new neighborhoods, carefully chosen for scenery, sense of community, and plenty of convenience. When you purchase new construction, like the Pointe at Hunter’s Creek, you do so with excitement about being the very first, and only, owner.
Like resales, new construction comes with the obligation to pay closing costs. These can range from 2 percent to 5 percent of the purchase price and include such things as origination fees, credit report and loan application fees, title search, survey and appraisal fees, attorney’s fees, recording fees, and taxes. With so much rolled into closing costs, it’s little wonder why home buyers opt to roll their closing costs into their mortgage. However, there are ways to lower settlement costs and avoid paying more than necessary.
Ways to Reduce Closing Costs
Because closing costs can be a significant out-of-pocket expense, you’ll likely be eager to reduce said expenses. As the nearby quote states, developers of new construction might offer to pay some of the closing costs to sweeten the deal. That’s just one way to pay less on settlement day.
“If you are purchasing a newly built home, sometimes your builder will cover some of these costs as an incentive for buyers to purchase a home, finance it with a preferred lender and go to settlement with a preferred title company. Resale buyers are also sometimes able to negotiate with the sellers to pay some closing costs depending on local market conditions and the individual terms of the sale.” —Realtor.com
To get an even better deal and cut down on closing costs, there are other things you can do. Before settlement, your lender is required to provide you with what’s known as a Good Faith Estimate, or GFE, and it breaks down all costs associated with closing. The good news about settlement fees is that many are negotiable, so, you don’t have to pay the full amount. Here are some ways to reduce closing costs:
- Get into a loyalty program. Many banks and credit unions give discounts on certain closing costs to borrowers obtaining a mortgage through their entity. If you apply and are approved for a home mortgage loan from a bank, you might be able to cut down on your closing costs a little.
- Close at the end of the month. One neat trick is to schedule your closing at the end of the month. This clever move is predicated on the per diem interest, which can really add-up if you choose to close at the beginning of the month.
- Request the seller contribute. As mentioned above, builders of new construction might offer to pay some of the settlement fees to offer a better deal. Regardless of the home, asking can’t hurt and you could find a little help from the other side of the table.
- Negotiate fees. Title insurance, commitment fees, application fees, courier and mail fees, and other miscellaneous fees add-up fast. Though you can’t necessary have all these waived, you might be able to negotiate them down.
- Use veteran benefits. If you are a military veteran, you might be able to get some assistance with closing costs, even if your mortgage isn’t through a VA loan. You might have to do a bit of research, but it will certainly be worth the effort if you qualify.
Another way to reduce settlement costs is to shop around for your choice of title company. You might well discover the lender’s preferred title company is a bit more expensive than one you can find on your own. Approaching title companies directly lets you vet each one and find the best deal.