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Tips for Handling Your Closing Costs

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So you've almost reached the end of the long and difficult journey involved in financing a new home. But now you're afraid one last obstacle may stop you: closing costs. Learn how to clear that obstacle with some legitimate and established methods.

Take A Small Second Loan

This sounds odd but it isn't too uncommon. If you can't afford the closing costs right this moment but you are sure you could pay them off over just a few months, you should seek a second lender to help you cover the closing costs on your mortgage.

Request the Lender Pay Closing Costs

While it may seem unlikely, you can also try to persuade the lender to cover your closing costs. They may not agree to pay them all, but you might be surprised how much they will cover if they are desperate to close the deal. Remember, they are essentially salesmen in these deals.

They want you to take that big loan so they can profit from the interest. To make sure they seal the deal, they may be more amenable to helping you reduce your closing costs than you expect.

Seller Concession Deals

This is a little less common, but another method to handle your closing costs is to negotiate a deal with the seller that reduces or covers your closing costs. If a house has been on the market for a while, the seller may be eager to just get the deal done. They may either reduce the sales price by the total of your closing costs (more common) or they may sometimes even help you cover them directly (less common).

The seller may also be amenable to a method called the seller concession. This is basically where the seller agrees to increase the sale price of the home by your closing costs, making it more likely the lender will increase the loan amount to cover the slight increase in the home's price. This way you can roll your closing costs into your mortgage.

Rolling Your Closing Costs Into Your Mortgage

Aside from 0 down home loans, this is probably the most common way to cover closing costs when you can't afford them straight away. The biggest issue here is that you need to have a good enough credit score or credit history to persuade the lender to give you a couple thousand more. Thankfully, they are often more flexible about increasing the financing by just a little than they would be for a major adjustment.

I suggest that you at least try to ask the lender to cover a portion of the closing costs and/or roll these final fees into your mortgage. They may agree to both because reducing the costs makes it a smaller amount to integrate into your mortgage and often they're just eager to get the deal done.