How to Avoid Closing Costs

One of the things that makes conventional loans so expensive are the closing costs associated with obtaining a new loan. This expense can sometimes be an exorbitant amount, and one that leaves the new homeowner completely out-of-pocket. A lot of lenders often don’t let the borrower know how much they will need to pay until the loan is closed and it’s too late.

Holding lenders accountable

The FHA and HUD are helping to curb the expense of closing costs by holding lenders accountable. Approved FHA lenders are required to give a Good Faith Estimate to potential borrowers so that they are aware of all the costs up-front for obtaining a loan. This also helps create a more competitive marketplace where borrowers can shop around until they find a lender who can offer them the best rates on their mortgage.

Lowering the costs

The FHA is also helping new homeowners by giving them the chance to roll the cost of closing fees into the new loan. When this is done, the lender will pay the closing fees and in return will charge you slightly more for your mortgage. This helps first time homeowners who may not have the necessary capital saved up for a big closing expense at the end of the loan process.

Lowering the down payment

To help new homeowners even further, the FHA issues loans that require as little as 3% for a down payment on the property. This makes homeownership much more affordable for everyone, especially when you consider the fact that conventional loans require anywhere from 5 to 20% for a down payment. Additionally, this 3% can come from any source, whether it is a friend, employer or charitable organization.

Finding a lender

When you are shopping around for a lender, you have the option of using a bank, savings and loans association or mortgage company. As long as they participate in the FHA loan program, you will be assured a Good Faith Estimate on closing fees and the option of a low down payment.

Getting Started Today

You can start the loan process today by taking a minute to fill out our secure online form. Pre-qualification is free, only takes a minute and has no strings attached.

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