I'm Didi and I live in the greater Philadelphia area. I'm looking to start my real estate investment journey with a house-hack. I have good credit and I've been preapproved but when it comes to the total amount needed to close- I'm tight on cash. I wanted to know if there were any strategies, lenders, programs or generally any suggestions in regards to lowering some closing costs. I'm all ears, thanks in advance!
Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
3y
@Account Closed, one strategy is to have the seller cover X% of closing costs. However, you'll need to verify with your lender how much the seller can contribute to buyer closing costs. Work with a resourceful real estate agent that can help negotiate this for you.
Real Estate Agent · Fort Collins, CO · Member since 2023 · 171 posts · 116 votes
3y
Hey @Account Closed,
like @Michael Dumler mentioned with getting closing cost help from the seller and working with a good real estate agent, a good lender who knows how to maximize all the available tools is also key.
Something else you could look into is down payment assistance programs to use in conjunction with the seller helping with closing costs to keep your out of pocket expenses as low as possible. I know we have a state sponsored down payment assistance program here in Colorado and that Bank of America has a nationwide one. But again I would get with a lender and agent that are both knowledgeable on all the options available to give you the best info. I hope that helps and best of luck on your first house hack 🤝🍀
Crestview, FL · Member since 2021 · 109 posts · 76 votes
3y
Look into working with the seller to have them pay closing costs and agree to raise the purchase price so that way it's in the loan instead of coming out of pocket.
Rental Property Investor · Gwinn, MI · Member since 2016 · 174 posts · 103 votes
3y
You might benefit from listening to episode 261 of the Real Estate Rookie podcast. They talk about the NACA program, and while I know pretty much nothing beyond what they cover in that episode, it might be something to look into.
Investor · Philadelphia, PA · Member since 2019 · 618 posts · 430 votes
3y
I think there are some great suggestions above. I would also add if you have almost no money for reserves you may put yourself in a bad financial position when issues pop up as they usually do when first setting up your property.
Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
3y
I would ask seller to cover closing costs up to a certain amount. This can be done if not in a multi-offer situation pretty easily. In a multi-offer situation can be tougher. Also talk to local banks and see what they may know of for first time home-buyer grants.
Lender · Fort Lauderdale, FL · Member since 2023 · 33 posts · 19 votes
3y
Quote from @Account Closed:
Hi there,
I'm Didi and I live in the greater Philadelphia area. I'm looking to start my real estate investment journey with a house-hack. I have good credit and I've been preapproved but when it comes to the total amount needed to close- I'm tight on cash. I wanted to know if there were any strategies, lenders, programs or generally any suggestions in regards to lowering some closing costs. I'm all ears, thanks in advance!
Hi Odinaka,
Depending on what you're looking for, you can do an FHA multi unit, run it as a primary, and rent the other units out and do as little as 3.5% down.
Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
3y
@Account Closed
Not every aspect of closing costs can be negotiated, but there are some areas where you can shop around and get a reduction in the amount that you pay. These tips can help with saving money on closing costs.
Know the fees and what's negotiable Some closing fees are set in stone, while others are flexible. Take the loan origination fee, for example. This is paid to the mortgage broker or loan officer as a commission for bringing the bank or lending institution the business. To lower the origination fee, you can ask your lender if there are any aspects of it that can be waived, such as the application or processing fees. Some lenders will bundle application and processing fees into the loan origination fees, while others won’t, so be sure to ask. Lenders are also supposed to provide you with a rundown of closing fees in advance, so you can determine which are within your budget.
Part of mortgage approval is making sure that the house is worth the asking price and owned by the person who says they own it. That requires the mortgage lender to do some due diligence and the cost of that gets passed on to the borrower. Mortgage-related fees include a title search, an appraisal, and a home inspection. The borrower also needs title insurance, which is often purchased from the bank’s preferred insurer. 2
Shop around beforehand When you reach a deal on a home, you have little time to shop for lenders and attorneys. Do that upfront in the pre-pre-approval phase of your home shopping. Shop before you even apply for pre-approval if you can because you may otherwise be locked in with a particular lender. It’s also important to know to the best of your estimation how much cash you will need at closing so you’re not surprised or, in the worst case, the purchase falls through because you’ve already tapped your reserves to come up with the down payment.
Title insurance in particular may be highly worth shopping around for. The provider that the lender recommends may charge however much in premiums each month, but that doesn’t mean a borrower can’t reach out to competitors to see what they charge. In 2021, the Urban Institute examined variability in title costs in several major markets and found great variability in title charges. By shopping for lower costs, homebuyers could save as much as $326 in Sacramento, Calif., and as much as $528 in Broward County, Fla. The study is cited by the National Association of Independent Land Title Agents trade group.
The same goes for the home inspection and survey. The prices will vary among vendors, which is why shopping around can save you money. Ultimately, your mortgage lender will have to sign off on the vendor for the mortgage process to proceed. When it comes to the appraisal, though, don’t expect to save. The lender orders the appraisal on your behalf. 3
Review estimated costs Be on the lookout for extra fees in the list of costs at closing in any loan estimates you get. Generally, there should be only the above-mentioned fees. If you spot any fees or charges you don't recognize or remember the lender mentioning, reach out for clarification on what those are and why they've been added to the loan estimate.
Look for closing cost assistance Consider special programs that may cover some or all of certain closing costs in certain circumstances, particularly for first-time buyers, low-income buyers, veterans, and active-duty military personnel. Some large banks will even waive certain costs for loyal customers.
However, there may be few options in some markets and a handful of states set the amounts, according to the National Association of Realtors. The amounts can vary from state to state, even among cities, and can depend on what exactly is covered, but realtors say to expect $1,000 on average.
You generally are expected to pay for the appraisal upfront at the time the lender orders it. Choose the right lender One of the easiest ways to cut your closing costs is to consider them upfront as you’re shopping around for a mortgage lender. Most homeowners know to talk to a few mortgage brokers to get the best interest rate on their loan but then fail to apply the same tactic when it comes to closing costs. One lender may charge more in closing fees than another one down the street. Armed with that information, you can approach your preferred lender to see if it will give you a break.
The mortgage industry is competitive and many lenders do have wiggle room in terms of the fees that they pass on to you. Be wary, though, if a lender offers you a credit toward closing costs. The tradeoff is often a higher interest rate over the life of the loan.
Buying a home is an expensive endeavor. Homebuyers not only have to come up with a 20% down payment but also have to cover the closing costs and attorney fees. Though you won’t get a break from your lawyer, you can reduce the closing costs your lender passes on to you. By shopping around for your third-party services, such as the home inspection and survey, you have the potential to save big bucks. Asking your lender for discounts on the loan origination fees will add more savings, making your closing costs a little more manageable.
Real Estate Agent · Philadelphia, PA · Member since 2012 · 24 posts · 7 votes
3y
Hi Didi, if you're buying in Philadelphia there is a first time home buyer grant available, 6% of the purchase price and up to $10,000. If you don't qualify for this grant due to your income or debt to income ratio, there are a few lender grants\credits available as well that you should avail.
Real Estate Agent · Seattle, WA · Member since 2017 · 150 posts · 80 votes
3y
There are probably first time home buyer programs in your area that you can take advantage of! The one I utilized a few years ago payed for 5K of my closing costs.
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