How Much Are Closing Costs in California 2024?
It’s no secret that buying a home is a huge financial decision, and there’s a lot more to consider than just the price of the home. Another important expense to consider when you’re buying a home is how much closing costs will be.
Closing costs are the taxes and fees associated with the purchase and sale of a home, such as title insurance and lender fees. Let’s break down how much closing costs are in California, who pays for them, and what costs you can expect to pay as a buyer and as a seller.
How much are closing costs on average in California?
In addition to the down payment, homebuyers will also need to pay closing costs before securing the keys to their new home. Generally, you can expect closing costs in California to add up between 2%-5% of the purchase price. However, keep in mind that closing cost amounts vary depending on several factors – such as the purchase price of the home, the type of loan, and any adjustments negotiated with the seller.
For example, if you’re buying a home in Los Angeles, which has a median sale price of $1,050,000, closing costs could range anywhere from $21,000 to $52,500. Or, let’s say that you’re buying a home in San Francisco, which has a median sale price of $1,403,500. Closing costs for a home here could cost you anywhere between $28,070 and $70,175.
Who pays closing costs in California?
So, who pays for closing costs in California? In most transactions, both the buyer and seller will pay closing costs. But the buyer and seller will pay for different closing costs and likely have different total closing cost amounts. Another thing to keep in mind is that buyers typically pay for closing costs out of pocket, while the seller’s closing cost payments are often deducted from the home sale proceeds.
Buyer closing costs in California
For homebuyers in California, you can expect closing costs to range 2%-5% of the purchase price. In most cases, you’ll pay earnest money, typically 1% to 3% of the home price, upon reaching mutual acceptance in your home purchase. This deposit is subtracted from your closing costs, reducing the total amount due at closing. Below are some of the common closing costs paid for by the buyer:
Appraisal fee: Home appraisals, which typically range from $300 to $500, are usually paid for separately at the time of the service. However, if not, you’ll need to pay for this at closing.
Inspection fee: Although not required, a home inspection is highly recommended. Home inspections generally range from $300 to $500 in cost and are usually paid at the time of service. However, if not, it will need to be paid at closing.
Loan origination fee: Some lenders charge a fee for creating your loan. As you shop around for lenders, inquire about what it covers and whether it’s negotiable to avoid high fees.
Loan processing fee: In addition to the origination fee, your lender may also charge a fee for processing your loan. This typically covers underwriting and related services. It’s recommended to discuss this fee with your lender to understand what this fee covers and if it can be waived.
Loan discount points: If you’ve purchased points to lower your interest rate, you’ll usually pay a one-time fee at closing. Each point can lower your rate by 0.25% to 0.5%. Consider your long-term plans, such as how long you plan to own the home or if you plan to re-finance, before purchasing points.
Private mortgage insurance (PMI): When your down payment is under 20%, you’re typically required to pay PMI. Some loans allow upfront PMI payment at closing, giving you the choice between higher upfront costs or increased monthly payments.
Title insurance: Title insurance is a one-time fee paid as part of closing costs. Buyers typically cover both lender and owner title insurance policies.
Homeowners insurance: Your annual homeowners insurance premium may be included in your closing costs in California.
Homeowners Association dues: If your property is part of a homeowners association, you’ll likely pay one month’s dues upfront at closing. These fees vary and contribute to maintenance and operational costs.
Property taxes: As part of closing costs in California, you may be required to prepay a portion of your property taxes at closing.
Seller closing costs in California
The closing costs covered by sellers in California can vary, but below are some of the common fees and costs that a seller pays for:
Real estate agent commission fees: These fees can be a significant cost for sellers. Commission fees may vary and are subject to negotiation. Sellers should discuss their options with their agent.
Homeowners Association fees: If the property is part of an HOA, the seller may need to pay a variety of fees. These can include HOA transfer fees, outstanding dues, and possibly a fee for obtaining HOA documents required by the buyer. The exact fees will depend on the HOA’s rules and regulations.
Property taxes: Sellers are responsible for any property taxes that have accrued but not yet been paid up to the closing date. These unpaid property taxes are typically prorated for the months that you owned the property.
Title insurance: As part of closing costs for sellers in California, sellers may pay for owner’s title insurance. Typically, this cost is based on the property’s sale price.
Transfer taxes: In California, there is a state levied tax on the transfer of ownership of a property. Sellers can expect to pay a one-time transfer tax as part of closing costs. There may also be additional taxes levied by local governments, such as counties and cities.
Median home sale price data from the Redfin Data Center during July 2024.
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