The average closing costs for a single-family home in 2020 topped $6,087 including taxes, or $3,470 excluding taxes. Orion and our brokers help homeowners in many states, and we’ve found that closing costs are more expensive in states with high costs of living and home prices. Fortunately, good brokers work with your clients so that they won't owe tens of thousands of dollars in closing costs, and Orion can suggest ways for your clients to pay for closing costs on a mortgage in addition to offering very competitive mortgage rates. The majority of borrowers pay for closing costs in cash, but that are some considerations. Good brokers know how closing costs can eat into savings at a time when your client may have little extra money to spare. Clients don't want to dedicate too much of their savings to paying for closing costs just to risk depleting their emergency fund, should an unexpected expense arise. 

One way is to roll closings costs into the mortgage. Depending on the type of mortgage you’re about to provide for your client, they may be able to roll most of the closing costs and fees into the balance of the loan. For example, Orion offers FHA loans which allow first-time home buyers to include closing costs in the loan amount. Or if refinancing an existing mortgage, they can typically roll the closing costs into the new home loan. Your Orion AE can answer questions concerning making sure that the closing costs aren't too high to offset our lower interest rates.

Another common way to cover closing costs for a home purchase is to ask the seller for concessions during the negotiation process. Instead of offering a lower price for the house your client wants, they could offer the full asking price and request that the seller absorbs 5% in closing costs. The maximum dollar amount of concessions they can ask for varies depending on the type of mortgage loan they’re approved for (FHA loans: 6%, USDA loans: 6%, VA loans: 4% Conventional loans:3-9%). But in today's real estate market it may be difficult to negotiate closing costs with a seller. Asking for concessions may make your client’s offer less appealing, and a seller who gets multiple bids on their property is likely to disregard any offers that include concessions.

Lastly, some401(k) providers allow your client to take a loan against their retirement account or make an early withdrawal in order to pay for costs associated with buying a house, including mortgage closing costs. This is not used very often, and Orion advises them to speak with an accountant. Generally, your client won't have to pay taxes or an early withdrawal penalty as long as the loan is repaid on time, they can borrow up to 50% of the vested balance or up to$50,000, whichever is less, and they'll pay interest back to themselves. But they'll have to pay income taxes on the amount, as well as a 10% early withdrawal penalty if they're younger than 59 and ½.

Helping you and your clients decide on options like this is just one of the ways Orion and our AEs can help!

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