Closing cost calculator: How much are closing costs in California?
When buying a house, expect to pay closing costs, unless you are approved for a mortgage loan that specifically has no fees due at closing. However, to get such a loan, you will pay a higher interest rate on the loan, or the fees will be rolled into the mortgage (which means you will pay interest on the fees).
Both the seller and buyer are each responsible for paying different closing costs. How expensive closing costs are depends on several variables, which we will discuss here in detail.
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Read on to learn more about how to calculate closing costs and the average cost of closing costs.
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What are closing costs on a house?
Closing costs are the fees both buyers and sellers pay when finalizing a real estate transaction. On average, closing costs amount to approximately 2% to 5% of the purchase price. California has some of the highest closing costs in the country.
How to calculate closing costs on a house
If you’d like to get an idea of how much you’ll pay in closing costs,
use this calculator. You’ll need to enter specific amounts, including the purchase price, etc.
For example, if you expect to spend $650,000 on a home, put 10% down ($65,000), at a 3.99% interest rate, and you’re using a mortgage broker, you can expect to pay roughly $22, 915 in closing costs.
Who pays for closing costs in California?
In California, both buyers and sellers are responsible for paying closing costs. On average, closing costs are approximately two to five percent of the purchase price of the property. The buyer’s closing costs may be under five percent, while the seller’s closing costs are often higher than five percent. This is because the seller pays their listing real estate agent’s commission at closing (if an agent was hired by the seller to list the property).
Learn more about who pays for closing costs in California.
Are closing costs negotiable?
Negotiating closing costs is possible, particularly for the buyer. Many of the buyer’s closing costs are fees charged by the mortgage lender, and most lenders are willing to negotiate or
waive certain fees. Even the buyer and seller may negotiate closing costs. This is often referred to as a “seller concession” that the seller provides the buyer to incentivize the purchase of the home.
Fee breakdown
Homebuyers and home sellers all want to know, who pays closing costs in California and does the buyer or seller pay closing costs?
Here is an overview of the fees that together make up mortgage closing costs:
Average closing costs for sellers in California:
Title service and settlement fees. According to the
California Land Title Association, "who pays" is not uniform from county to county in California. In some counties, the buyer will pay while in others the seller will pay.
Owner's title Insurance. In California, the buyer typically pays for title insurance, but the seller may offer to split the fee as a “seller concession.”
Documentary transfer tax. This is a fee charged by the county in which the property is located.
Recording fees. Fees are charged by the county in which the property is located, to cover the cost of recording the change of ownership. Each local government will have its own fee schedule.
Property taxes. The amount of property tax paid by the seller during the year will be prorated, and a refund may be owed to the seller depending on how much tax was already paid.
Seller concessions. These are costs that the seller may have agreed to pay as an incentive to sell their home. This could include providing the buyer with a home warranty, prorated property tax, or payment of an appraisal or inspection fee.
HOA transfer fee. If the property is located in a community with a Homeowners Association, fees may be charged to transfer ownership documents, depending on the bylaws of the HOA.
Termite inspection. This is not required by law; however, the seller may choose to provide the buyer with an inspection report. The homebuyer may ask that a termite inspection be added as a contingency, in the event the home is found to have a termite problem. Cost: $200 - $800 depending on the size and location of the property.
Natural Hazard Disclosure (NHD). According to
California state law, the seller or an agent of the seller must provide the buyer with the NHD. This report discloses whether the property may be at particular risk for flood, fire, earthquake, and seismic activity. Cost: $50 - $150.
Listing real estate agent commission. If the seller enlisted the help of a real estate agent to list and sell the home, a commission is due to the agent at closing. The amount will vary depending on the seller-agent agreement.
Average closing costs for buyers in California
These closing cost estimates will vary from city to city and county to county.
Loan application fee. Charged by the lender at the time the mortgage application is submitted. Cost: 0$ - $500.
Origination fee. The fee the lender charges to originate and process the mortgage loan. Cost: 0.5% – 1% of the loan amount.
Appraisal Fee. A property value appraisal is required by lenders as part of the mortgage process. The fee is for the services of a licensed real estate appraiser. Cost: $300 - $650.
Wire transfer fee. The fee for “wiring” or transfer of funds. Cost: $5 - $50.
Home inspection fee. After the contract is signed the buyer should get a home inspection. Cost: $300 - $800.
Credit report. All lenders require a copy of the buyer’s credit report. Cost: $25
Survey fee. A survey of the property is required. Cost: $300 - $1,500 depending on the size of the property.
Lender's title insurance. This protects the lender in case of any encumbrance (such as a lien) found in the title. Cost: $500 - $2,500.
Property taxes. These vary by property.
Notary fees. The fee for having all signed documents notarized. Cost: According to the Notary Council, the
California notary code permits
notaries to levy less than $15 for each notarized signature and an additional travel
fee.
When are closing costs paid?
The buyer may pay some of the mortgage fees early in the mortgage approval process. However, most closing costs are paid by both the buyer and the seller on closing day.
Can closing costs be rolled into a mortgage
Yes,
closing costs can be “rolled into” the mortgage loan amount. If you are a homebuyer interested in how to lower closing costs, you may choose to roll the costs into your loan amount if you do not have enough money saved to pay for the closing costs at the closing table.
If you choose this option, your closing costs will become part of your total mortgage loan amount. The downside is that you’ll be paying interest on these fees, so you’ll pay more in the long run. Your lender will let you know which closing costs can be included in the mortgage and which cannot.
How to reduce closing costs
All homebuyers want to reduce closing costs. Here are some options homebuyers may investigate to avoid closing costs when buying a house:
- Seller concessions. Buyers can ask to have the sellers cover a portion of the costs (known as seller concessions). Seller’s concessions were more popular during years when the housing market was sluggish and sellers offered concessions to entice buyers to purchase a home.
- Shop different lenders. When you talk to lenders, ask what their loan-related fees are and which fees they would waive.
- Review closing cost fees. Compare the fees after you’ve shopped around. Ultimately, trust is more important than fees. Be sure to choose a lender who answers your questions, returns your calls, and appears trustworthy. These qualities are more valuable than saving a few dollars.
- Grants and loans. Sometimes there are financial assistance and other programs that provide a grant or other form of funds to qualified homebuyers. If you are a first-time homebuyer or have a low income you may qualify. Be sure to ask each lender when you’re shopping for a mortgage.
- Discounts and rebates. Some lenders offer promotions such as discounts and rebates in order to attract home shoppers looking for a mortgage. Don’t be afraid to ask lenders if they have any current promotions.
- Consider no-closing-cost mortgages. Some lenders will offer mortgage programs with no closing costs. Be aware that even though you won’t pay fees at the closing table, there may be funding fees added or “rolled into” the mortgage loan amount.
- Close at the end of the month. Buyers can benefit by closing at the end of the month. Doing so means you’ll pay less days of per diem interest on the mortgage loan and prorated homeowners insurance, compared to closing in the middle of the month. Most new policy payments start on the first of the month.
Learn more about how to negotiate closing costs.
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