Home buyers in California sometimes confuse the home inspection with the home appraisal, and vice…
How much are closing costs for home in California, on average?
This is a common question among buyers who are planning a purchase in the Golden State. And rightfully so. Closing costs can add up to thousands of dollars during a typical real estate transaction. So it’s something you want to plan for in advance.
Average Closing Costs for California Home Buyers
Mortgage loans usually come with closing costs. This is true for most people who buy a home in California, and also for homeowners who are refinancing. These costs include such things as loan origination fees, appraisal fees, title and escrow fees, attorney fees, as well as any discount points you choose to pay at closing.
Average closing costs for home buyers in California typically range from 2% and 5% of the purchase price. (It partly depends on where you live, since local tax rates play a role in the final number.) A more expensive home purchase can result in higher closing costs, while the opposite is true for more affordable properties.
As mentioned earlier, the typical home price in California as of spring 2022 was around $775,000. Using the 2% to 5% range, this means the average closing costs for home buyers in California currently falls somewhere between $15,500 and $38,750. But this is just an average. Your costs could vary due to a number of factors.
According to a study conducted last year, California is one of the most expensive states for home buyer closing costs. (Big surprise, right?) New York, Hawaii and Washington, D.C. also ranked high on the list.
Whether or not you pay “points” on your loan can also weigh heavily toward your final costs. For instance, some borrowers choose to pay mortgage discount points in exchange for a lower rate, while others do not. This can greatly influence the amount they have to pay when closing.
A List of Common Fees, Taxes and Charges
Here are some of the common closing costs for home buyers in California:
- Home appraisal fee
- Credit report fee
- Closing / escrow company’s fee
- Title search fee
- Property survey fee
- Courier fee
- Homeowners insurance (typically the first year is paid 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 used to secure a lower mortgage rate)
Note: Depending on your county, the type of loan you are using, and other factors, you might not have to pay for some of these costs. This is a generalized list that includes some of the more common fees and charges for home buyers in California.
When Will I Know How Much I Have to Pay?
When you apply for a mortgage loan, your lender will provide you with an estimate of closing costs. This document will help you prepare. But the amount you actually have to pay when you close could be slightly different from the upfront estimate.
A few days before your scheduled closing date, you should receive a finalized total for your closing costs. This is the actual amount you’ll have to pay, usually in the form of a cashier’s check or wire transfer.
As a home buyer, the best thing you can do is start saving money as soon as possible. In California, closing costs are just one of the expenses home buyers encounter. Depending on the type of mortgage loan you use, you might have to come up with a down payment as well.
The sooner you start saving, the better!
Family Member Contributions Are Often Allowed
We’ve looked at the average closing costs for home buyers in California, as of 2022. We’ve examined some of the most common fees and charges that can add up during the home-buying and mortgage process.
Now, let’s end this article with a bit of good news.
Depending on what type of mortgage loan you use, there’s a good chance you could use third-party funds to cover some or all of your closing costs. The third party might be a family member, a close friend, or some other approved provider.
This is what’s known as a “down payment gift,” and it’s a topic we’ve covered in a previous blog post. So, if you can’t afford the average closing costs for a California home purchase, you might still have a path forward. Just choose a mortgage program that allows for down payment gift contributions.