With interest rates at all-time lows, many people are jumping into the real estate market to buy their dream homes. For many, this is one of the most significant purchases they will ever make. Although rates create an ideal buying opportunity, we still have to consider other factors that affect real estate transactions, such as closing costs.

What Are Closing Costs?

First, what are closing costs? Closing costs are fees and expenses that come with finalizing the purchase of a home. These include loan origination fees, property taxes, sales tax, realtor commissions (if applicable), and many more. No matter what type of home you are purchasing, these fees will be a part of the overall process.

Closing costs typically vary based on several factors. These include the property's sale price, the total down payment, the size of the home, the location, the type of mortgage loan you choose, and what you can negotiate with the seller to cover. Generally, the closing costs can range from 2% - 6% of the home's sale price.

Do First-Time Buyers Have to Pay Closing Costs?

Yes, unfortunately. There is no particular rule to help first-timers escape closing costs. Even if you aren't using a realtor, you will still have to pay all the other closing costs mentioned above. There are, however, a few steps that you can take to reduce closing costs. 

How Can I Reduce Closing Costs? 

A few of the best methods for reducing closing costs are as follows:

Study Your Loan Estimate

Firstly, you should go through your loan estimate line by line and learn about all of the fees you will pay. Some expenses are unnecessary, and an attentive buyer can identify them and use them in an upcoming negotiation.


Negotiation is a skill that can save you a lot of money. Your first objective will be to negotiate with your lender and see if you can get the unnecessary fees removed from the agreement. Next, you can contact the seller and request that they help cover some of your closing costs. A motivated seller may be willing to do this if it guarantees the sale. 

Close at the End of the Month

A little bit of patience can go a long way! Suppose you wait to finalize the sale until the end of the month. In that case, it results in the lowest possible prepaid interest cost you can attain in your purchase contract. Using this method can reduce several other fees. 

Final Thoughts

Whether you are a first-time homeowner or a seasoned buyer, closing costs are unavoidable in the purchasing process. While it is possible to reduce your closing costs, you will only buy a home if you pay some closing fees. However, negotiation can go a long way. If you do your research, you may pay significantly less than a person who blindly signs a sales contract.