Home buyers typically pay closing costs of 2-5 percent of the purchase price of a home, paying an average of $3,700 in fees to lenders and other parties that have a hand in paperwork you may never understand.
Fees vary by state and credit score, but so-called "junk fees" from mortgage lenders must be the same for all customers under federal law - fees such as origination, underwriting, administrative and doc-preparation. A HUD settlement statement lists the actual settlement costs, which shouldn't change from the time you get it to when the sale is complete.
But home buyers can negotiate some closing costs, either themselves or through their real estate agent or lender.
The savings can be worth the effort, especially in areas where mortgage fees are highest. A recent survey found that New York and Texas have the highest closing costs at $5,435 in New York and $4,619 in Texas on a $200,000 loan. Missouri had the lowest, averaging $3,006.
Here are some closing costs worth checking for a better price:
Shop around for lender fees
Since lenders must legally charge the same fees to all customers, you won't be able to negotiate fees with them. But you can shop around for the lender with the lowest lender fees through their good faith estimates.
But it's unlikely you'll save much money, or if you do, you'll get what you pay for, says David Hall, president of Shore Mortgage, a residential mortgage lender in 50 states.
"The closing costs pretty much are what they are," Hall says, and the lender's good faith estimate of closing costs shouldn't differ from the HUD statement.
But at least shop around for lenders so you're sure that you're getting a fair deal, he says.
"We encourage people to shop around, just to make sure people aren't overcharging you," Hall says.
Get a higher loan rate
If you're willing to pay a higher loan rate, then lenders will discount the fees, Hall says.
The fees, no matter how much lower they are, can be added to the loan and are less painful to pay with a slight bump in a monthly mortgage payment.
You can't avoid title insurance, which a lender requires to protect it and you in case there are undiscovered liens against the property, but you can shop around for lower title insurance or negotiate the fee.
Title fees typically cost $500 for every $100,000 in home value, Hall says. A $250,000 home would have about $1,250 in title fees, for example.
Lenders also require a home insurance policy, which can cost from $300 to $1,000 a year, depending on where you live and the type of home. Shop around for an insurer that offers discounts, such as for having multiple policies, a new roof or any home improvements.
Ask the agent to contribute
If you're using the same real estate agent to list your current home for sale and you're buying a new home with them, ask the agent to contribute to paying your closing costs, says Todd Huettner, a mortgage broker and a real estate agent. The agent is making a commission on both sales, and should be able to kick in some money.
Another chance to ask is when the agent finds the house they want quickly, and won't have to spend weeks continuing showing them houses. If the deal is done quickly, it will save the agent time and money, and is worth asking for a contribution to closing costs, Huettner says.
Negotiate with the seller
Even after the hard work of negotiating a home's price, there is still room to ask a home seller to cover at least part of a buyer's closing costs.
"Most people don't even know they can do it," Hall says.
When doing this, be sure to follow two rules, Huettner says. First, the seller contribution and any agent contribution can't exceed your actual costs. You can't be paid to buy the house. Second, these contributions can't exceed lender limits. These limits depend on the loan amount and loan type, so check with your lender in advance.
"Don't tell your lender about this at the last minute," Huettner says. "Any interested party contributions must be included in the underwriting and appraisal, which can take some time."
Know when to ask
The key for asking a seller for concessions is to know if you're in a buyer's or seller's market. If you're in a seller's market, it can be more difficult to negotiate closing costs.
Don't lowball in a seller's market, Hall says. For example, if a seller is asking $199,000 for a house, offer $202,000 and ask for $3,000 back in closing costs. This can help pay closing costs by having them financed in the loan.
If a home has been on the market for more than a month, then it's probably a buyer's market and buyers will have more room to ask for a seller's help in paying closing costs.
"If you are a buyer in a multiple offer situation where you really want to get a house, you would want to either not ask for as much closing cost help, or if you do, you would want to offer over asking price to give them the same net amount," says Rocky Bowers, a real estate agent in Bethesda, MD.
"In today's market, it is pretty normal for a seller to contribute 1-3percent," though factors such as how much cash the buyer has and how bad they want the home can change that, he says.
Add closing costs to the loan
The marketplace is changing from the majority of sellers paying closing costs to buyers now not getting the full amount of closing costs that they used to, at least in Massachusetts, says Brian Koss, executive vice president of Mortgage Network in Danvers, MA.
"In some cases, a borrower could negotiate a premium priced loan with his or her lender," Koss says. "With such an arrangement, the buyer's closing costs and even his or her relocation expenses are financed into the mortgage and paid off over the term of the loan. In situations in which the seller does not want to cover closing costs, this could make the buyer's offer more appealing."