money on mortgage formsClosing costs are necessary expenses to make real estate transactions happen. Most of them are mandatory, such as loan origination, appraisal, and dead-recording fees, but others are optional, like mortgage discount points. They’re paid to the professionals that take care of the legal side of the deal.

Since they’re practically unavoidable when you buy a home for sale in Annapolis, Denver, or Chicago, knowing how they work can help you save money. For starters, here are key factors about closing costs:

Every Cost Is a Closing Cost

Any cost other than the balance is a closing cost. Generally, they’re one-time charges, but some are recurring, including interest payments, taxes, and insurance premiums.

While there’s no escaping them, sound decision-making can help keep them to a minimum. For instance, you can pay a 20% down payment to avoid paying private mortgage insurance and ask for a lower interest rate.

They Will Be Paid One Way or Another

Non-recurring closing costs are usually paid out of pocket, but this isn’t always the case. You can ask the lender to offset them in exchange for higher interest. This is why “no closing cost” mortgages don’t mean that they come with no closing costs. They’re only applied in a different manner, so they don’t need to be paid up front.

You Don’t Necessarily Have to Shoulder Everything (or Anything)

As a buyer, you can ask the seller to split or cover the closing costs for you. It depends on how desperate the other party is to make a sale. If you have plenty of leverage at the negotiating table, especially when paying cash, you can work out a deal with the property seller.

The closing costs are only some of the things you need to think about when buying a house. If you plan, you can reduce or get rid of them completely to save you a lot of money.