Average Closing Costs for California Home Buyers
How Exciting! You just got your loan pre-approved from a mortgage company you diligently screened. As of this moment, you and your realtor have the confidence to begin searching for homes in the gorgeous state of California. In all likelihood, it'll be in Los Angeles, Orange County, San Diego, or the Bay area.
Saving for a down payment is not an easy thing to do, but once you have done that and maximized your credit score,there's one more number you need to understand. How much are closing costs going to be on the home I am buying in California?
The majority of lenders will inform you the closing costs will be between 3% to 5% of the home's value. What makes up the closing costs?
Let's look at a typical transaction in Orange County, CA. Based on data from Zillow, the median home value in the California is about $548,000 as of May 2019. In Orange County, the median home value is $721,500. For the purposes of this article, we will calculate estimated fees based on the Orange County value, and predict a conforming loan in the amount of $649,350. (90% loan to value). Although there are 3-percent down loan programs too.
Earnest Money Deposit
You found the perfect home in your favorite South Orange County neighborhood through your preferred real estate agent. Your Realtor will prepare the legally binding California Association of Realtors Residential Purchase Agreement and Escrow Instructions with a purchase offer for $721,000.00 along with other pertinent information
As soon as the contract is signed by the buyer and seller, an earnest money payment is required by the buyer within a specified period. Normally, home buyers give a deposit of 1% to 2% of the sales price payable to the settlement/closing agent. This deposit needs to come directly from the buyer's bank account or other confirmed funds. It is not technically a cost, but it acts like a cost since it’s needed to close the transaction.
Once the purchase closes as scheduled, the buyer will receive credit on the closing disclosure and settlement forms for the earnest money deposit on the closing date.
Home Inspections
A physical home inspection is not required but isn't a cost to skip. The buyer should have as much knowledge as possible about the structure and quality of the home. A professional and good real estate agent will see to it that happens. The reason is not all defects or conditions are easily visible to the average home buyer.
The inspection fees range from $300 to $1500 and are commonly paid by the buyer prior to the home being inspected. It is worth noting this expense is non-refundable if the buyer chooses not to proceed with the purchase.
Buyers normally don't proceed if the inspection reveals material defects and the cost to remedy is substantial and the seller will not partially pay for it. The purchase agreement you and the seller signed will indicate a firm time period in which all inspections, and objections to inspection findings, need to be completed, disclosed and addressed to the seller.
Lender Fees and Loan Costs
These fees will be due and payable at the closing appointment, and calculated into what the buyer's cash to close will be. Third party fees, such as the credit report ordered by your lender ($50) and appraisal fees from a local licensed appraisal company ($550 - $900), are commonly added into this category. Get an closing cost estimate days before you close your loan.
Discount Points
This cost is optional for the buyer, but it may turn out to be a very wise decision to lower the mortgage interest rate it to keep your payments low for the long term. One point is equal to one percent of the loan amount.
Title Insurance fees
Title insurance companies trace the history of the current owners, mortgages, liens and other encumbrances on the property. Their job is to ensure the buyer receives a clear title commitment on their new home and the lender is protected.
Although fees for title insurance can be negotiated in California, the buyer customarily pays for the loan policy premium and fifty-percent of the settlement closing agent fee, along with other fees such as deed and mortgage recording to the County recorder's office. The seller usually pays for the property transfer tax fee.
