Purchasing a new home, especially your first home, is very exciting! Whether you’re in contract on the first home you saw, or spent over a year looking, when closing escrow you will likely incur closing costs, in addition to the purchase price of the property, that can vary based on factors such as location, loan type, and specific agreements. Here are some potential closing costs homebuyers may encounter:
- Loan Origination Fee
This fee covers the administrative costs associated with processing and underwriting the mortgage loan. It's usually a percentage of the loan amount. Typically between 0.5%-1.0%.
- Appraisal Fee
Lenders require an appraisal to determine the fair market value of a property. The buyer is typically responsible for covering this cost. Estimated $1,000.
- Credit Report Fee
Lenders pull credit reports to assess the buyer's creditworthiness. The cost is usually borne by the buyer. Estimated $40.
- Home Inspection Fee
Buyers may choose to hire a professional home inspector to assess the condition of the property. The inspection fee is typically paid by the buyer. Typically $450-$1,000 in the East Bay.
- Title Search and Insurance
Before closing, a title search is conducted to ensure the property's title is clear of any liens or ownership disputes. Title insurance protects the buyer against potential title defects. The cost of the title search and insurance is typically split between the buyer and seller. Typically calculated by multiplying the purchase price by the rate per thousand your insurance company uses.
- Survey Fee
A survey determines the boundaries and physical features of the property. The survey fee is generally paid by the buyer. Average cost is $600.
- Escrow Fees
Escrow services hold and distribute funds during the closing process. Escrow fees may include charges for the escrow agent's services and document preparation. Fees are determined by the loan type and provider.
- Prepaid Property Taxes
Buyers may need to prepay a portion of the property taxes for the remaining months of the year. Amount varies by county.
- Prepaid Homeowners Insurance
Lenders typically require buyers to secure homeowners insurance before closing. The buyer will need to pay for the first year's insurance premium upfront. Estimated $4,000-$8,000, depending on coverage.
- Homeowners Association (HOA) Fees
If purchasing a property within an HOA, the buyer may need to pay prorated HOA fees or contribute to reserves. Estimated $100-$1,000.
- Recording Fees
These fees cover the cost of recording the deed and other legal documents with the appropriate government office. Estimated $50-$100.
- Transfer Taxes
California’s transfer taxes are based on the purchase price of the property. Taxes vary by city. For example, in Oakland, the transfer tax on a $1,000,000 home is 1.10%, or $1,100.
- Private Mortgage Insurance (PMI)
If a buyer puts down less than 20% of the purchase price, they will likely need to pay PMI, which protects the lender in case of default. The PMI rate is determined by the amount of the loan, down payment, mortgage rate and credit score of the buyer.
- Miscellaneous Fees
There may be additional fees associated with courier services, wire transfers, document preparation, or notary services.
If you are interested in determining what your estimated closing costs would be based on the price of the home, this closing cost calculator can provide you with an estimate.
It's important for East Bay homebuyers to review the Loan Estimate and Closing Disclosure provided by the lender before the actual closing, as these documents outline the estimated closing costs specific to their transaction. This way your questions can be answered and there’s no delay when signing the final papers.
Working closely with a trusted real estate agent and lender can help buyers understand and navigate the closing costs associated with their home purchase. If you’d like to have an agent reach out regarding the closing process, or to answer any of your real estate related questions, reach out to us!
Estimated costs as of May 2023. Information deemed reliable but not guaranteed.
