30% of Home Buyers Worry They Can’t Afford Closing Costs. Here’s How to Save

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Sometimes, you can find ways to spend less.

Key points

• The higher your mortgage, the more you might spend on closing costs.
• Some closing costs are negotiable, so it pays to see how your lender might work with you.

Buying a home is, generally speaking, not an easy feat. But in today’s housing market, it’s more difficult than usual.

Not only does the housing market sorely lack inventory, but the limited homes up for sale have higher-than-usual prices. Throw in the fact that mortgage rates have gotten more expensive, and it’s no wonder so many people are hesitant about buying.

While rising mortgage rates and sky-high home prices may give potential buyers pause, a good 30% are hesitant to purchase a home because they’re not sure they can afford closing costs, according to Bank of America’s 2022 Homebuyer Insights Report. If that’s one of your concerns, know that you may have some options for keeping those costs down.

Can you change your closing costs?

Closing costs are the fees mortgage lenders charge to finalize a home loan. These costs vary by lender, but generally, expect your closing costs to be 2% to 5% of your mortgage amount. So if you’re borrowing $300,000 to finance a home, your closing costs could fall between $6,000 and $15,000.

Clearly, that’s a large range. The costs you face largely depend on the specific fees your lender charges. If you’re presented with a very large number, it pays to negotiate. 

Closing costs include various fees, many of which your mortgage lender can dictate. Those fees include:

• Application fees
• Title insurance
• Prepaid property taxes
• Appraisal fees
• Recording fees

Some of those costs are outside your lender’s control. Property taxes, for example, are an expense your lender doesn’t impose — those come from the city or town where the house is. Similarly, recording fees (the fee to enter a mortgage into public record) are usually set at the municipal level, so your lender can’t change them.

But your mortgage lender can change its application fee, so if that number is high, ask for a break. Your lender may say no, but it’s worth asking.

Further, you may be able to do your own title search and secure your own title insurance, spending less than what your lender would charge. Similarly, if your lender lets you hire your own home appraiser, you might spend less.

Compare fees

Closing costs, like mortgage rates, are at each lender’s discretion. So if you’re unhappy with the fees your lender charges to finalize a mortgage, shop around with other lenders and see what their numbers look like. 

You may find that one lender charging lower closing costs charges a higher interest rate. So you need to run all of the numbers to see where the best deal lies. But know that if you’re worried about paying a lot in closing costs, there may be some wiggle room to negotiate.

Just as importantly, most lenders will let you roll your closing costs into your mortgage so you don’t have to write a check up front. While that means borrowing more money, it’s an option you can always fall back on if you’re eager to buy and can’t swing those costs immediately.