There are Three different categories of closing costs:
The ones you CAN negotiate lower:
The ones you CAN NOT negotiate lower;
The ones you CAN negotiate lower, but SHOULDN'T!
AND, one BIG Caveat -> Your lender often has limits, built into the loan structure, on how much closing costs assistance you can get. You can lower some costs, but there IS a limit to how much you can have the other side pay.
THE ONES YOU CAN:
The Sales Price - Buyer & Seller - yes, No one thinks of this as a closing costs, but, really, its the biggest. Work hard on this; either raising it, or lowering it!
PMI - Buyer - one of those things that you can negotiate to ZERO. You just have to have 20% of the Sales Price.
Owners Title Insurance - Buyer - You have to buy Lender's title insurance; they rather insist. But, owner's title insurance may be unnecessary, if you have little equity in the property, if the title is clear and unlikely to have clouds; if you want to save a buck or two.
Liability Insurance - Buyer - Most insurers try to sell you insurance for the price of the sale. But, is the land going to burn down? Get insurance for the amount it would take to rebuild the home.
Transfer Fees - Buyer & Seller - I'm not sure why title companies charge more for wiring the money, than cutting a check, but they often do.
'Optional' Lender Fees - Buyer - Sometimes there are 'official' sounding fees on a lenders estimates, that are basically just extra profit, paid to themselves. Yes, Loan Officers should make money. But I recommend getting a couple of lenders estimates, then compare the lender fees (not the title or taxes; lenders have no control over those.) That way you will have an idea of what is necessary, and what is not.
THE ONES YOU CANNOT:
Taxes: Buyer & Seller - The email below is correct though; even though tradition states who pays what, seldom is it a matter of law. Even when it is, you can still ask the other side to pay for it.
Governmental Recodation of documents - Both -
PMI: - Buyer - if you don't have the 20% down.
Insurance: - Buyer- You WILL have to get some insurance for the property.
Lender's Title Insurance: -Buyer - They insist.
Loan Payoff and/or Penalty - Seller - Again, they insist.
THE ONES YOU CAN, BUT SHOULDN'T -
Inspections - Buyers - Inspectors range from $50 - $1000. You are about to make one of the most expensive purchases in your life. I'd get the best, toughest, most thourough inspector I could, no matter what the cost.
Commissions - Sellers & Buyers - Again, Big Sale, Big Purchase. I don't shop around for Brain Surgeons either. Take a look at figures, take a look at history. Are they productive? Do they Deliver? As a good book says, The workman is worthy of their hire; or as my daddy used to say, you get what you pay for.
I hope this helps you. You're about to make one of the biggest decisions in your life; and one of the scariest. I recommend that you hire the best; they're worth it.
And GOOD LUCK! Home Ownership is still the best and quickest way to build personal wealth! What other investment keeps the rain off? Keeps you warm in the winter? Gives you a place to put your stuff? Even if your home doesn't gain a single dollar in value (and most do), it still means you weren't paying someone else's mortgage during that period!
As Lisa mentioned, the best case scenario is to get the seller to pay your closing costs. That number also depends on what your price point is and what percentage the loan allows you to receive in concessions. But if the seller won't pay the closing costs then typically the following are negotiable.
- Who pays the recordation taxes and fees. These are customarily paid by either the seller or the buyer or split 50/50, varying from state to state, but just because something is customary doesn't mean it is not negotiable. This is also true with termite inspections, but do you want to nitpick over a $65-$100 charge?
- Attorney fees can be negotiable, if your agent has a good relationship with the title company.
- Title insurance fees can be negotiable.
- Origination fees can be negotiable, if your lender isn't greedy and your agent has a good relationship with them. Lenders may tell you that their origination fees are set and there is nothing they can do about them, but my experience has been this is where the lender him/herself makes their commission and,, unless they are already discounting it because of their relationship with your RealtorÂ®, it is negotiable if they want to keep your business on future transactions.
Not negotiable is property tax. It gets prorated for the seller up to the day they settle and you pay the difference for the rest of the year because you will own it. Also, if you have an FHA loan then the PMI (mortgage insurance for not putting 20% down) is paid up front for the first year. It's called up-front loading.
There may be other items that are negotiable, or non-negotiable, from other areas of the country, but these items are typical of the Metro DC area where I am, as well as most other areas of the country.
Hope this helps!