Closing costs can add thousands of dollars to a home’s purchase price and often catch buyers off guard right before the finish line. Whether you’re browsing homes for sale in Los Angeles, California, or exploring homes for sale in Austin, Texas, understanding these fees can help you plan your actual purchase costs.
Although closing costs usually cannot be completely eliminated, there are legitimate ways to reduce them, change payers, or effectively “wait” them through credit or assistance programs. In most cases, “exemption” means that the costs are covered or offset, rather than being completely eliminated.
This Redfin article details when you can waive closing costs and the most practical strategies to lower your closing costs or avoid prepayments.
What are closing costs?
Closing costs are the fees and expenses required to complete a real estate transaction. It usually ranges from 2% to 5% of the home purchase price and is paid at closing. Common closing costs include:
Loan origination fee Appraisal and credit report fees Title insurance and escrow fees Attorney or settlement fees Prepaid taxes and homeowner’s insurance Recording and transfer fees
Some of these costs are controlled by the lender, some are third-party fees, and others are mandated by the government, which affects flexibility.
Can closing costs actually be waived?
In most cases, closing costs are not actually “forgiven” or eliminated, but they can be covered, reduced, or rolled into other parts of the transaction. When a buyer talks about waiving closing costs, it usually means one of the following:
The seller pays them The lender covers them through credit They roll into the loan balance A grant or assistance program pays them
It’s important to understand the differences because each option changes where costs are incurred, including upfront payments, over time, and purchase price.
1. Requesting the seller to pay closing costs (seller’s concession)
One of the most common ways to reduce or avoid paying upfront closing costs is to negotiate seller concessions. This strategy shifts some or all of the closing costs to the seller as part of the sales agreement, reducing the amount of cash required at closing.
Seller concession mechanism
The seller agrees to pay certain closing costs on your behalf. These costs are paid at closing rather than out of your pocket. This approach is especially common when:
Limitations on seller concessions
Most loan programs have a cap on how much a seller can contribute.
Conventional loans: typically up to 3% to 9% depending on down payment FHA loans: up to 6% VA loans: up to 4% (plus certain allowable fees)
Seller concessions can significantly reduce your cash to closing, but are often offset by a higher purchase price or different negotiated terms.
2. Use lender credit (higher interest rates and lower upfront costs)
Another common way for buyers to “wait” closing costs is to use lender credit. Instead of paying all closing costs out of pocket, you pay a slightly higher interest rate in exchange for a credit from your lender that covers some or all of your upfront fees.
Lender credit system
If you agree to a higher mortgage rate, in return the lender will apply a credit towards your closing costs at closing. This reduces the amount of cash you need to bring to the table. This makes sense in the following cases:
You don’t have enough money for a down payment. You’re planning to refinance or sell in the next few years. You’re more concerned about lower closing cash than the lowest possible interest rate.
The trade-off is higher interest costs over time. As such, lender credit tends to work best for short to medium-term holding periods rather than long-term home ownership.
3. Build closing costs into your loan (if allowed)
Some loan programs allow you to roll certain closing costs into your loan balance rather than paying them out-of-pocket at closing. This approach can reduce your down payment requirements, but it increases the amount you borrow and typically increases your monthly payments. This often happens when:
VA Loans (especially for refinances) FHA Refinancing Streamlined Some Home Improvement Loans
For standard purchase loans, it is relatively uncommon to include closing costs in the loan and typically requires:
While securing closing costs can make purchasing or refinancing easier, it’s important to weigh the higher loan balance and long-term interest costs against the short-term savings at closing.
4. Take advantage of down payment and closing cost assistance programs
Many state, local, and nonprofit programs offer grants or forgivable loans that can cover closing costs, down payments, or both. These programs are designed to make homeownership more accessible and can significantly reduce the amount of cash required at closing.
These programs are often available for the following purposes:
First-time home buyers Moderate income buyers Buyers in specific areas
The following items are eligible for support:
Closing costs Down payment Both
Some programs require:
Income restrictions Home buyer education course Living in the home for a certain number of years
It’s a good idea to ask your lender or real estate agent about assistance programs early in the process, as availability and requirements vary widely by location and can affect your timeline and loan eligibility.
5. Compare lenders and negotiate fees
Not all closing costs are fixed, and many buyers don’t realize they have more negotiability than they think. Lenders may charge different fees for the same service, and some fees, particularly lender-controlled fees, can vary widely from loan quote to loan quote.
By taking the time to compare offers and ask questions, you can significantly reduce your out-of-pocket costs at closing. You may be able to reduce costs by:
Compare loan quotes from multiple lenders Ask lenders to match or beat fees Ask about origination or processing fees Purchase title and escrow services (if allowed)
Even small reductions can add up to meaningful savings.
6. Close at the right time
The timing of the closing can affect the amount of cash required upfront. Although you can’t completely eliminate closing costs, choosing the right closing date can reduce upfront costs such as interest, taxes, and insurance that will be paid by the time your first mortgage payment is due. You can reduce your upfront costs by:
Deadline at the end of the month (prepaid interest is reduced) Choose a time when property taxes and insurance payments are cheaper
These timing adjustments will not reduce your closing costs, but they will reduce the total amount owed at closing and make it easier to manage your cash until closing.
Closing costs that typically cannot be waived
Although many closing costs can be reduced or passed to another party, some fees are difficult or impossible to avoid. These costs are typically set by government agencies or required by lenders or third parties, so there is little room for negotiation. Fees that typically cannot be waived include:
Government recording fees Transfer taxes (if applicable) Required insurance premiums Certain third party fees
Because these costs are mandatory, most “waiver” closing cost strategies focus on who pays the fees rather than eliminating them entirely.
Is it worth waiving closing costs?
Whether it makes sense to waive closing costs depends on your financial priorities and how long you plan to own your home. Lower upfront costs make purchasing easier, but often come with trade-offs that affect long-term spending.
Waiving or reducing upfront closing costs can be helpful if:
I don’t have enough cash I want to save money for repairs and emergencies I plan to move or refinance within the next few years
It may be better to pay your closing costs upfront if:
You want to minimize long-term interest costs You plan to purchase a home for the long term You can afford the initial costs
Weighing both the short-term cash savings and the long-term cost impact will help you choose the option that best fits your homeownership goals.
