How to Negotiate Closing Costs on a Mortgage

Read Time: 5 minutes

Home buyers typically pay closing costs of 2-5% of the purchase price of a home and while fees vary by state and credit score, some junk fees from lenders must be the same for all customers under federal law. These include origination, underwriting, administrative, and document preparation costs. 

As part of the process, buyers will get a HUD settlement statement that lists the settlement costs when the transaction is in progress. Those fees should not change from when it’s delivered until the sale is finalized.

While some fees are set, buyers and their agents can negotiate some closing costs to save money. Here are some closing costs you can negotiate as part of your overall transaction efforts.

Lender Fees

Lenders must legally charge the same fees to all customers so you won’t be able to negotiate fees with an individual institution. However, you can shop around for the lender with the lowest lender fees through their good faith estimates.

You probably won’t save much money because they’re usually competitively priced, but at least you can confirm you’re not getting charged significantly out of line from other lenders.

Loan Rate

Lenders will discount the fees if you’re willing to pay a higher loan rate. This may seem like a wash but no matter how much lower they are, those fees can be added to the loan and are less painful to pay with a slight bump in a monthly mortgage payment.

Title Insurance

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.

Home Insurance

Lenders require a home insurance policy to protect their investment. You can shop for an insurer that offers discounts for multiple policies or significant home improvements.

Agent Contribution

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. Since they’re making a commission on both sales, they should be willing to kick in some money.

Also, if the agent finds a house you want quickly, they won’t have to spend lots of added time doing the legwork to show you several houses. If the deal gets done quickly, it will save the agent time and money, and it is worth asking for a contribution to closing costs.

Seller Negotiations

Even after 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 are reluctant to do this, but it is a viable strategy to get the deal done.

The seller contribution and any agent contribution can’t exceed your actual costs. You can’t be paid to buy the house.

These contributions can’t exceed lender limits, which depend on the loan amount and type. Don’t wait until late in the game to ask, either. Any interested party contributions must be included in the underwriting and appraisal.

Read the Market

Before asking for monetary concessions, it is important to know if you’re in a buyer’s or seller’s market. If you’re in a seller’s market, negotiating closing costs can be more difficult.

If a home has been on the market for more than a month, it’s probably a buyer’s market, and buyers will have more room to ask for a seller’s help paying closing costs.

But if you’re a buyer in a multiple offer situation where you really want to get a house, you’ll want to ask for little or no closing cost help, or if you do, you offer over the asking price to give them the same net amount.

Other Home Buying Negotiation Tactics

In addition to negotiating mortgage closing costs, there are several strategies you can use to negotiate a home sale from a position of strength.

Having a good real estate agent is essential, and here are some other things you can do.

Pre-approval Letter

A pre-approval letter shows how much you’re approved for with a loan, but it should also include the exact amount you’re offering for the house. The point isn’t to overplay your hand by showing you’re approved to borrow more than you’re willing to pay for the house.

Seller’s Motivation

After checking comparable properties to know their worth, ask why a seller is selling their home. Also, ask the following:

  • How soon do they need to move? 
  • Where are they going, and what will they do if it doesn’t sell? 
  • Are there family circumstance changes such as marriage, divorce, childbirth, graduation, illness, or relocation?

Also, check the mortgage balance, how long they’ve lived in the home, permits for any improvements, tax assessments, and court records to see any activity in family law, criminal law, or business litigation. Consider asking the listing agent to see if they’ll reveal anything noteworthy.

Point Out Flaws

If a house has flaws that go beyond the cosmetic and will cost a fair amount of money to repair, then it can be worthwhile to ask for a lower price so you can afford to make the fixes. This is why a home inspection is so valuable.

It can reveal major issues that could cost you if you aren’t aware of them in advance.

Lender Follow-up with the Listing Agent

If your lender is willing, have them call the listing agent to talk you up as a buyer.

If there are two exact offers and one has an attentive loan officer who calls to review the file with the listing agent, that will stand out.

Don’t be a Problem Buyer

People like to sell their homes to people they like as part of the emotional attachment component of a home sale. In many cases, selling a home is not always about gravitating to the bidder with the highest bid.

Sellers often want to pass off their homes to people they like because what they are selling was once their home.

Sellers want a pleasant experience from the execution of the sales contract to the closing, and communicating you are not a problem buyer can go a long way in a negotiation process.

Don’t Submit Too Many Counteroffers

If you want to look like a savvy negotiator, an abundance of counteroffers isn’t going to win you points. The further apart you are in price, the more counteroffers you’ll have to endure before acceptance, and until the deal closes, you’re always in danger of having another offer submitted that could undercut your efforts.

The seller could cut off negotiations and work on the other offer instead.

Don’t waste time by countering a lot. Instead, start with your best offer. When you do counter, consider same-day deadlines instead of 24-hour deadlines.

Kara Johnson

Kara is a Rye, New York-based author and contributing writer for She is a graduate of Hampshire College.

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