What Closing Costs Are Negotiable When Buying a Home?

Buying a home comes with more than just the purchase price—closing costs can add thousands to your final expenses. These fees cover various services required to finalize the transaction, but some can be negotiated, potentially saving you a significant amount.

Understanding which costs are flexible and how to negotiate them effectively can reduce your financial burden.

Loan Origination and Underwriting

Lenders charge fees for processing and evaluating a mortgage application, known as loan origination and underwriting fees. These compensate the lender for reviewing financial documents, assessing creditworthiness, and ensuring the loan meets regulations. Origination fees typically range from 0.5% to 1% of the loan amount, while underwriting fees fall between $500 and $1,500.

Negotiating these fees is possible, especially with strong credit, a sizable down payment, or multiple loan offers. Some lenders may reduce or waive origination fees to secure your business, particularly in competitive markets. Borrowers can also request a lender credit, where the lender covers some closing costs in exchange for a slightly higher interest rate.

Underwriting fees, while less flexible, can sometimes be reduced if bundled with other lender charges. Comparing loan estimates from different lenders provides leverage. Some credit unions and online lenders charge lower fees than traditional banks, making them worth considering.

Title Services

Title services ensure that the property’s ownership history is clear and that no legal claims could jeopardize your rights. These include a title search, title insurance, and administrative fees. While some costs are non-negotiable due to state regulations or lender requirements, others may offer room for discussion.

A title search examines public records to confirm the seller has the legal right to transfer ownership, uncovering outstanding liens, unpaid taxes, or other encumbrances. Costs vary by location, but buyers can sometimes negotiate a lower rate by shopping among title companies. Some states allow buyers to choose their own provider, creating an opportunity to compare fees.

Title insurance protects both the lender and the buyer from future claims against the property’s ownership. Lender’s title insurance is typically mandatory, while owner’s title insurance is optional but recommended. The price is often based on the home’s purchase price, but discounts may be available if the seller recently purchased a policy. Buyers can request a “reissue rate,” which provides a discount if the existing policy is relatively new. Negotiating with the seller to cover part or all of the title insurance cost is also common, especially in markets where buyers have more leverage.

Administrative fees, such as document preparation and settlement charges, can add to the overall cost. Some title companies bundle these fees, while others list them separately. Buyers should review the breakdown of charges on their Loan Estimate and Closing Disclosure forms to identify any excessive or duplicate fees. If a title company includes vague or overly high administrative costs, buyers can ask for clarification or request a reduction.

Discount Points

Lenders offer discount points as a way for borrowers to lower their mortgage interest rate by paying an upfront fee at closing. Each point typically costs 1% of the loan amount and can reduce the interest rate by around 0.25%, though the exact benefit depends on market conditions and lender policies.

For buyers planning to keep their mortgage long-term, paying for points can result in substantial interest savings. For example, on a $300,000 mortgage with a 30-year fixed rate, purchasing two points for $6,000 could lower the monthly payment enough to break even within a few years. However, if selling or refinancing before reaching this break-even point, the upfront cost may not be justified. Buyers should calculate their specific break-even period.

Some lenders allow negotiation on the price of points or offer promotional discounts. Comparing multiple loan estimates can reveal variations in pricing, and some lenders may provide better terms to secure your business. Additionally, buyers can explore whether purchasing points is tax-deductible, as the IRS typically allows deductions on points paid for a primary residence in the year they are incurred, subject to specific conditions under current tax laws.

Seller Contributions

Negotiating seller contributions can reduce out-of-pocket expenses at closing. These contributions, also known as seller concessions, involve the seller covering specific costs that the buyer would typically pay. The amount a seller can contribute is often capped based on loan type and down payment size. Conventional loans backed by Fannie Mae and Freddie Mac allow sellers to contribute up to 3% of the purchase price if the buyer puts down less than 10%, while FHA loans permit up to 6%, and VA loans allow up to 4% toward closing costs and prepaid expenses.

Sellers may be more inclined to offer concessions in slower markets or if the property has been on the market for an extended period. Buyers can request contributions to cover expenses such as prepaid property taxes, homeowners insurance, or escrow fees. Structuring the request strategically—perhaps by offering a slightly higher purchase price in exchange for concessions—can make the proposal more appealing to the seller while still providing financial relief to the buyer.

Third-Party Fees

Beyond lender and title-related expenses, third-party fees cover services provided by external vendors necessary to finalize the transaction. While some charges are fixed, others can be negotiated or reduced by selecting cost-effective providers.

Appraisal fees, typically ranging from $300 to $600, confirm the property’s market value. While buyers cannot waive this requirement, they can compare costs among approved appraisers if the lender allows multiple options. In competitive lending environments, some lenders may offer appraisal credits as an incentive. Home inspection fees, usually between $300 and $500, are another significant cost. While skipping an inspection is not advisable, buyers can negotiate bundled pricing if additional services like radon or pest inspections are needed.

Escrow and notary fees, which cover the handling of funds and document authentication, can also vary. Some escrow companies charge a percentage of the home’s price, while others have flat fees. Buyers can request quotes from multiple providers in areas where they have the right to choose. Similarly, notary fees, which may be required for loan documents, can sometimes be reduced by using mobile notary services or negotiating with the title company to include them in the overall closing package.