The Home Buyer's Guide to Savings
Learn how to save $3,000 to $5,000 (or more) when buying a home.
Whether you're buying a starter home or your dream home, you don’t need another fluffy real estate article to point out the obvious. How about some insider tips on how to make buying a home more affordable, especially in today's market. These times are unprecedented but if you can grasp these 6 points, you'll be better prepared going into the homebuying process than the last generation was.
Strategies for saving money...in any market.
1. Choose your own Settlement Company.
And don't accidentally waive your right to do so.
As the buyer, you have the right to shop around and choose which settlement company/title insurance company you want to use. It's the law in Pennsylvania. You're not obligated to go with your lender's recommendation or use real estate agent's in-house title company. When it comes to buying a home, remember this:
Buyers who shop around save the most.
Don't accidentally waive your rights.
Along with your Agreement of Sale, your real estate agent may present you with a stack of papers to sign. Be careful. You may be asked to sign a disclosure obligating you to use the in-house title company. Don’t sign it, not yet anyway.
Once you sign it, you'll be waiving your right to shop around and you'll be locked in to using the in-house provider. And that move could cost you thousands of dollars in fees.
If your lender or real estate agent suggests that you use the in-house title company, be polite! Ask for a quote, but let them know you'll be comparing multiple quotes...and to make their best offer from the start.
Get the Facts: Title Insurance and the Settlement Process
2. Ask your lender for a Cosing Cost Credit.
With a credit towards your closing costs, you can offset thousands of dollars in fees.
Lender credits towards allowable closing costs are common and can significantly reduce the cash needed to make settlement. Depending on your situation, that could be just as important when shopping around as the interest rate. The loan's interest rate is key, but you should also take into account the lender's fees and the total cost over the life of the loan. The best deal may come with a slightly higher interest rate and credit towards closing costs.
It’s a good idea to talk to a few different lenders or mortgage brokers during the pre-approval process. Get a few estimates and weigh your options. Here are a few questions to ask:
- What fees and closing costs should I anticipate?
- Which services can I shop around for?
- Are you willing to offer me a credit towards closing costs?
How much are Closing Costs?
Because closing costs include a lot of categories from taxes and fees to insurances, most buyers have no idea how much they should expect to spend. Sure, you'll get an exact number 3 days before settlement, but that doesn't give you much time to plan. That's why we created CashToClose™. It's the most accurate DIY closing cost estimate available to PA home buyers. No downloads or email address required. And it's free. Looking at houses? Pop in any Pennsylvania address and estimate a few details to give it a try.
3. Choose a Real Estate Broker who offers Commission Credit.
There ARE real estate agents willing to help reduce your out of pocket expenses.
Real estate commissions are negotiable, especially in today's market. We’re noticing more and more agents and brokers crediting a portion of their commission to their buyer at closing. This can reduce the cost of buying a house by thousands of dollars. Be sure to inquire about a commission credit during the interview process.
Real estate fees are also negotiable. Ask your broker if they charge an administrative fee to manage your transaction and if they're willing to waive it. This can save you up to $500 or more. Besides, your title company is capable of managing your transaction and should be willing to do so at no additional charge.
Which Fees Are Negotiable?
While many closing costs are unavoidable, there are some fees that can be negotiated down, waived, or avoided altogether.
4. Avoid the One Stop Shop
Don't trade "convenience" for savings.
The One Stop Shop… not a cost-effective way to buy anything, especially a house.
Many real estate brokers enter into business arrangements with title insurance companies. The broker will own a piece of the "in house title company" or share in the profits when they steer their clients to their affiliates. The client is sold on the convenience of the all under one roof option but they'll end up paying more. It’s just not possible to offer the customer a really good deal with all the profit-sharing happening. Learn more in our Avoid the One Stop Shop blog post.
Why shopping around for title insurance is time well spent.
Consumers who shop around and compare services and fees will save substantially.
Complete and Accurate
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Enter an address, estimated settlement date and a few details, and get an onscreen estimate of your pro-rated closing costs including local property taxes, lender escrows and seller reimbursements.
5. Settlement doesn't need to take all day!
If you are well prepared, you are in and out in under an hour.
There are several options today to make settlement convenient for the home buyer. In office settlements, coffee shop settlements, online settlements and hybrid settlements. If you, your lender and your title insurance / settlement company are on the ball, settlement will be a breeze. You can do your part - and avoid costly delays - by coming to settlement prepared. Here are the most important legal documents you'll most likely be signing or reviewing at the settlement table. It's worth taking a few minutes to get familiar with them in advance.
Settlement Day Checklist
What to bring with you, what to take with you when you leave
Bring These on Settlement Day
Appraisal is complete, all of the inspections are finished and your mortgage lender and title insurance company are making sure that all of the i’s are dotted and t’s are crossed for settlement. Here is a checklist to make sure that you are prepared.
Leave Settlement with These
Save your marked up title commitment from settlement, as this serves as evidence of your title insurance until you receive the actual owner’s policy in the mail. Following settlement, your title company will record your new deed and mortgage then issue your owner’s title policy. Your copy of the policy and recorded deed will then be mailed to you.
6. Buying a home with a spouse, partner, fiancé or family member?
The Type of Tenancy you declare on the deed should NOT be an afterthought.
If you're buying real estate with someone else, your relationship status will impact your options for how you list names on the title. There are 3 different types of tenancy, and the one you declare on the deed is actually quite important. The type of tenancy indicates how the ownership is legally structured and how the property's ownership will be handled after one of the tenants is gone. Your title company can help you understand your options so that come settlement day, you're not rushed through this very important decision. Understanding your options now will help you avoid very costly surprises later on.
Save up to $700 or more at the settlement table!
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*Rather than pay a real estate broker service / administrative fee, which averages $350-700, let ALT process your transaction at no additional charge.
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