Closing Costs for Buyers

Beyond your down payment, you'll need to budget for closing costs—the fees associated with finalizing your home purchase. Understanding these costs helps you prepare financially.

What Are Closing Costs?

Closing costs are fees paid at the end of the transaction to complete the home purchase. They cover services from various parties involved in the transaction.

Typical range: 2-4% of the purchase price

On a $350,000 home, expect $7,000 to $14,000 in closing costs.

Common Closing Costs

Lender Fees

• Loan origination fee: Lender's fee for processing your loan (typically 0.5-1% of loan amount)
• Discount points: Optional fees to buy down your interest rate (each point = 1% of loan amount)
• Application fee: Processing your loan application
• Credit report fee: Cost of pulling your credit
• Underwriting fee: Reviewing and approving your loan

Third-Party Fees

• Appraisal fee: $400-700, required by lender to verify property value
• Home inspection: $300-600, paid at time of inspection (not at closing)
• Title search: Verifying ownership and finding any liens
• Title insurance: Protects you and lender against title defects

Prepaid Items

• Homeowner's insurance: First year's premium often due at closing
• Property taxes: Prorated taxes, plus reserves for escrow account
• Mortgage insurance: If applicable, first month plus reserves
• Interest: Prepaid interest from closing date to first payment

Recording and Transfer

• Recording fees: Filing the deed and mortgage with the county
• Transfer taxes: Varies by location (California cities may have transfer taxes)

Breaking Down an Example

Purchase price: $350,000 Loan amount: $315,000 (10% down)

Cost Category	Estimated Amount
Loan origination (1%)	$3,150
Appraisal	$550
Title insurance	$1,200
Escrow fee	$1,000
Prepaid taxes (3 months)	$1,100
Prepaid insurance	$1,400
Prepaid interest	$500
Recording fees	$150
Total	~$9,050

This is approximately 2.6% of the purchase price.

Ways to Reduce Closing Costs

Negotiate Seller Concessions

Sellers can contribute toward your closing costs (within loan program limits):

• FHA: Up to 6%
• Conventional: 3-9% depending on down payment
• VA: Up to 4%

In a buyer's market, sellers are more likely to agree to concessions.

Shop for Services

You can shop for:

• Lender (compare Loan Estimates)
• Title insurance
• Home inspection
• Homeowner's insurance

Lender Credits

Some lenders offer credits toward closing costs in exchange for a slightly higher interest rate. Worth considering if you're cash-constrained.

No-Closing-Cost Loans

Some lenders offer loans where closing costs are rolled into the loan amount or offset by a higher rate. You still pay—just differently.

What You'll See at Closing

Before closing, you'll receive a Closing Disclosure at least 3 business days in advance. This document details:

• Final loan terms
• Monthly payment
• Itemized closing costs
• How much cash you need to bring

Compare it to your Loan Estimate. Significant changes require explanation.

Cash to Close

Your "cash to close" includes:

• Down payment
• Closing costs
• Minus any earnest money already deposited
• Minus any seller credits

This is the amount you'll wire or bring as a cashier's check.

Planning Ahead

Don't be caught short at closing:

1. Get a Loan Estimate early in the process
2. Budget for the high end of estimates
3. Keep funds liquid—don't lock up money you'll need
4. Ask your lender about any costs you don't understand

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Questions about what you'll need at closing? Contact Greg Franklin or call (559) 816-7780 to discuss.