Can closing costs be avoided?

[SportGuy]

I heard on the Dave Ramsey show that some home loans don't require closing costs. I didn't fully understand so hopefully someone here can explain. He said on a small loan (roughly $50k) where the home buyer was paying at least 50% in cash (therefore the home would be worth at least $100k), then a conventional mortgage isn't required and a bank may offer just a home equity type loan or something like that and this avoids closing costs.
I'm not sure I have all these points accurate, can someone help?

[ua_guy]

I think it's helpful to understand what closing costs are because it's not just "a" fee that can be waived, it's a bunch of fees that roll up as part of a final settlement when a home or piece of property is conveyed.

A summary breakdown of closing costs from Zillow:

•A fee for running your credit report.
•A loan origination fee, which lenders charge for processing the loan paperwork for you.
•Attorney’s fees.
•Discount points, which are fees you pay in exchange for a lower interest rate.
•Appraisal fee.
•Survey fee, which covers the cost of verifying property lines.
•Title insurance, which protects the lender in case the title isn’t clean.
•Title search fees, which pay for a background check on the title to make sure there aren't things such as unpaid mortgages or tax liens on the property.
•Escrow deposit, which may pay for a couple months' property taxes and private mortgage insurance.
•Pest inspection fee.
•Recording fee, which is paid to a city or county in exchange for recording the new land records.
•Underwriting fee, which covers the cost of evaluating a mortgage loan application.

You may be able to have certain fees waived, if you do get a conventional loan, but that's going to depend on the lender and how badly they want your business. They often waive origination fees and underwriting fees, sometimes the appraisal fees, etc.

The rest of it is all costs related to funding escrow and the conveyance of the property having to do with the title, title insurance including excise taxes (if you are the seller, typically), and the notary.

Regarding the type of loan products you go with or are available to you, that stuff will change and some (and more) fees might be applicable.

In regards to what Dave Ramsey said, I don't know. On a house that costs $100k and if I was putting $50k down, yeah, depending on income level, it would make sense to go with a personal loan or line of credit that could presumably be paid off in 4-5 years, skipping all the fees associated with a conventional mortgage loan, but not the title/property itself. There would still be the other settlement fees regarding the conveyance of the home.

[bjl584]

Dave Ramsey often talks about his real estate investing on his show. He also says that he never finances any of the purchases. So, if you are buying real estate with cash, then closing costs and a lot of other fees could probably be avoided. But, that isn't practical for the average person. You could always ask the seller to pay the closing costs or at least half of them. That's a fairly standard request when negotiating on a property.

[disneysteve]

Another thing to watch for is when banks advertise "no closing costs" that often equates to a higher rate or fees being rolled into the loan amount. As ua_guy pointed out, many closing costs are unavoidable because they represent actual costs incurred in the process of registering and transferring the property to a new owner.

[ua_guy]

Another thing to watch for is when banks advertise "no closing costs" that often equates to a higher rate or fees being rolled into the loan amount. As ua_guy pointed out, many closing costs are unavoidable because they represent actual costs incurred in the process of registering and transferring the property to a new owner.

Bingo. Always go home after meeting with a mortgage lender and run the numbers yourself, and see where fees have been hidden and/or "waived." Amortization tables do not lie, and what seems like a big win (waived origination fee) can cost you dearly for the next 7, 15, 20, 30 years or whatever the term of the loan is.

[SportGuy]

Great information. Thanks

[scfr]

I paid cash for my home and still had to pay the following fees: Escrow, Courier, Recording, and Survey. Very low compared to what I would have paid if I had a loan, but still not zero.

My uncle purchased my grandparents' home via a personal loan and I would imagine that even then they had to pay a recording fee to make the transfer of ownership official. Super minimal, but again not zero.

[agarlits]

I heard on the Dave Ramsey show that some home loans don't require closing costs. I didn't fully understand so hopefully someone here can explain. He said on a small loan (roughly $50k) where the home buyer was paying at least 50% in cash (therefore the home would be worth at least $100k), then a conventional mortgage isn't required and a bank may offer just a home equity type loan or something like that and this avoids closing costs.
I'm not sure I have all these points accurate, can someone help?

Aside from financing them with the loan I don't know of any way. Even that isn't avoiding the closing costs its just paying for them +interest with your loan. But if you find a way be sure to let me know