How to Avoid Closing Cost on Foreclosed Home

Buying a property involves the buyer paying closing costs, which are fees paid to the lender to process and prepare the mortgage loan that usually run between 3 and 5 percent of the loan balance. When buying a foreclosed property from a bank, you're still ultimately responsible for these. However, there may be ways around this since sellers motivated to find a buyer may agree to pay all or a portion of these fees.

Bargain with the mortgage lender to pay the closing costs. Mortgage companies are eager to sell their foreclosures and begin recouping their losses. Lenders are more open to negotiations if a property attracts little interest. Talk to the lender handling the foreclosure, and ask them to pay the closing costs to eliminate your out of pocket expense.

Discuss no-closing costs mortgage loans. Ask your home loan lender to waive closing costs altogether, and then agree to pay a higher interest rate on the home loan. The higher mortgage rate on the home loan can compensate for not paying the closing fees on the loan.

Pay for the property with cash and avoid a mortgage loan. If you can't bargain over closing costs, real estate investors and home buyers with cash have the option of buying a foreclosed property outright. Because cash purchases do not involve mortgage loans, there are no fees to pay the lender.


  • You can always ask your lender to increase the mortgage amount in order to roll the closing costs into the loan balance. Let's say you need a mortgage for $100,000, and the closing costs on the deal amount to $4,000. Ask your lender for a mortgage loan in the sum of $104,000.