Personal Finance Advice

It isn’t as if you have a choice to not pay closing costs, but you do have choices as to how you go about it.  Although many lenders tack closing costs on in the attempt of upping their profit from the transaction - often referred to as junk fees - closing costs are a necessary evil of buying a house.  Closing costs occur when you buy a house, refinance a house, and in some cases, when you get an equity loan or line of credit.

How can you avoid paying closing costs? The first thing you should do is to find a lender who only charges the necessary closing costs.  You can always to expect to pay some fees, but there are other fees that some lenders won’t charge because they’re considered junk fees.  Look for a lender who claims to only charge the bare minimum for closing costs, and carefully study the closing costs estimate sent to you after your application is sent in.

Some lenders make the claim that they have the ability to offer No Closing Cost Mortgages.  In the vast majority of instances, what the lender really does is to roll the closing costs into the balance of the mortgage loan.  In this case, although the borrower does not have to pay the closing costs at closing, the borrower actually winds up paying more for the closing costs in the long run because rolling them into the mortgage loan means that interest accrues on the costs.

So how can you avoid paying closing costs? If you’re buying a house then you always have the option of requesting that the seller pays the closing costs.  You would request this when submitting your actual offer to buy.  Although sellers certainly aren’t required to accept this request, if you find an eager seller who has the ability to cover the cost of the closing costs then you will probably get your request granted.  Keep in mind, however, that asking the seller to pay your closing costs may stifle any other concessions, such as a lowered price on the house.  For this reason, make sure that this is the best situation financially.  Don’t let the desire to avoid closing costs stop you from negotiating a better purchase price on the house.

If you’re refinancing your house, ask the lender if there are ways to avoid certain closing costs.  For example, you might be able to avoid the need for another survey if you have a copy of the last survey completed (as long as the survey isn’t too old).  You should also be aware that some closing agents - such as title companies and attorneys - charge less than other closing agents, so unless your lender will only work with certain closing agents then you have the opportunity to shop around and find an agent that charges the least amount of money.