Average Closing Costs for Home Buyers in California

"How much are the closing costs, on average?" Now that is a common question that arises, and a valid concern. Real estate closing costs can quickly add up to thousands of dollars during a real estate transaction. So, when purchasing a home in California, it is essential to plan for these expenses in advance.

Typically closing costs range from 2% to 5% of the purchase price. As of early 2023, the median home price in the state was $775,000. This means that an average buyer could expect to pay between $15,500 and $38,750 in closing costs.

Closing costs are associated with mortgage loans, whether it's for homebuyers or homeowners refinancing their properties. These costs encompass various items, such as loan origination fees, appraisal fees, title, and escrow fees, and even discount points paid at closing.

The average closing costs for homebuyers fall within the 2% to 5% range, but the final amount can depend on factors like location due to local tax rates. Higher-priced homes will generally have higher closing costs, while more affordable properties will have lower costs.

The inclusion of "points" in the loan will have an impact on the final closing costs. Some borrowers choose to pay mortgage discount points to secure a lower interest rate, while others opt not to pay them. This decision can greatly influence the amount owed at closing.

Here is a list of common fees, taxes, and charges associated with closing costs for homebuyers in California:

• Home appraisal fee
• Credit report fee
• Closing/escrow company's fee
• Title search fee
• Property survey fee
• Courier fee
• Homeowners insurance (usually paid for the first year at closing)
• Recording fees
• Transfer taxes (charged when the title transfers from seller to buyer)
• Lender's attorney fees
• Mortgage processing fee
• Mortgage underwriting fee
• Discount points (prepaid interest to secure a lower mortgage rate)

Note: Depending on the county, loan type, and other factors, some of these costs may not apply. This list provides a general overview of the common fees and charges for homebuyers in California.

When applying for a mortgage loan, the lender will provide an estimate of the closing costs to help prepare buyers. However, the actual amount due at closing may differ slightly from the initial estimate. A finalized total for closing costs is typically provided a few days before the scheduled closing date and is paid through a cashier's check or wire transfer.

As a homebuyer, it is advisable to start saving money as soon as possible since closing costs are just one of the expenses involved in purchasing a home in California. Depending on the mortgage loan type, a down payment may also be required.

It is worth noting that there is good news for homebuyers in California. Depending on the mortgage loan program, it is often possible to utilize third-party funds to cover some or all the closing costs. This third party could be a family member, close friend, or an approved provider, and it is commonly referred to as a "down payment gift." Exploring mortgage programs that allow for down payment gift contributions can provide a path forward for those unable to afford the average closing costs of a California home purchase.

In conclusion, understanding the average closing costs and exploring options for assistance can help homebuyers in California better prepare for the financial aspects of purchasing a property.