How Suze Orman Says You Can Save Thousands of Dollars on Home Buying Costs
Is it really possible to lower your closing costs? Suze Orman thinks so.
- There are upfront costs to pay when buying a home.
- These closing costs can be very expensive.
- Suze Orman has some tips for saving on those upfront costs.
When you’re buying a new home, you don’t just have to consider current mortgage payments when pricing your property. There are upfront fees to be paid, which you will need to cover at closing. Closing costs can be as much as 2% to 5% of the value of your home loan, which is usually a considerable sum.
The good news is that most people have options to lower the upfront costs they end up paying when buying a home. In fact, finance expert Suze Orman has offered some tips that could potentially save you thousands of dollars.
Here’s how Suze Orman suggests reducing closing costs
According to Orman, there are a few key ways to lower your closing costs and pay less upfront costs. It all starts with the loan estimate that mortgage lenders are required to provide to potential borrowers within a few days of applying for a mortgage.
The loan estimate “means you can easily compare mortgage options from different lenders before deciding which lender you want to work with,” Orman points out. By comparing costs, borrowers can find the lender offering the most affordable loan overall, including upfront fees and ongoing expenses.
Orman also advises taking another crucial step in an attempt to reduce closing costs. Specifically, she urges borrowers to negotiate the fees they might have to pay as a condition of getting a loan. While not all fees are negotiable, Orman suggests that borrowers can haggle over these fees:
- Initial loan origination fees. This is the amount a lender charges just to make the loan, and it can be as high as 0.5% to 1% of the total amount borrowed. These fees alone cost several thousand dollars for most home loans, so it’s worth looking for a lender that doesn’t charge them or trying to get the lender you’re hoping to work with to lower their fees.
- Home insurance. Getting quotes from multiple insurers can help homeowners find the company with the best rates.
- Property tax and insurance escrow. Orman explains that some lenders require borrowers to prepay several months of property taxes and insurance costs, which are then placed in an escrow account to pay those bills as they come due. Orman says she doesn’t like it at all, because you’re tying up money by paying it off in advance, and the escrow account leaves the lender responsible for paying property taxes and insurance on time. She urges owners to take on this responsibility themselves.
- Title insurance. This type of insurance protects against defects in your ownership of the home. Usually, you must purchase both title insurance from the lender and title insurance to protect your own interest in the home. Orman thinks it’s a good idea to shop around for both types of title insurance, as you could potentially get a cheaper policy than the one offered by the provider your lender usually works with.
By taking the time to shop around and compare lenders — and negotiating those common closing costs — you could potentially save thousands of dollars when buying your home. As a result, Orman’s advice here is certainly worth heeding.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
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