Before committing to buy a home in the Bay Area, it is helpful to know what costs you might encounter. Here is a breakdown of real estate closing costs to help you better estimate how much it will cost to buy or sell a home.
What Are Closing Costs?
Closing costs are the fees, charges and taxes required to (A) originate a buyer’s mortgage loan and (B) transfer the property from seller to buyer.
The home buyer pays for many of these costs, while others are paid by the seller. And like many things in real estate, closing costs are negotiable. For instance, a Bay Area home buyer might ask a seller to credit back a portion of his or her closing costs to compensate for needed repairs or updates. More commonly, the two parties each pay their own closing costs. This varies from transaction to transaction and an expert Torii agent can help you navigate your particular purchase.
How Much Do Bay Area Home Buyers Pay for Closing Costs?
The total amount of closing costs you pay will vary based on several factors, including: (1) the lender you use, (2) the state in which you reside, and (3) the size of your mortgage loan.
In terms of closing costs, California is one of the most expensive states, with closing costs well above the national average. This is partly because California has some of the most expensive housing markets in the country, and the price of the home can affect the buyer’s closing costs. Another great reason to consider purchasing with Torii.
In the San Francisco Bay Area, home buyer closing costs typically range from 3% to 5% of the purchase price. But costs can fall outside of this range in some cases. Buyers who pay cash for a house encounter fewer closing costs because they’re not dealing with a mortgage lender. But even in the case of an all-cash purchase, there are tax and appraisal fees to be paid.
If you multiply the purchase price by 3% to 5%, you’ll have a general idea as to how much your closing costs will be. But this is an approximation. Your mortgage lender should give you a more accurate estimate of closing costs when you apply for the loan. Torii can connect you with the best Bay Area lenders to ensure you’re in perfect hands.
Breakdown of Home Buying Fees and Charges
Here’s a breakdown of a buyer’s common San Francisco Bay Area closing costs (with a mortgage loan):
- Mortgage application fee (tend to range from $200 to $500 on average)
- Credit report
- Origination fee (origination services might include loan application processing, underwriting, and other administrative services. Origination fees are quoted as a percentage of the total loan amount. They usually cost around 1% of the loan amount. So the bigger the loan, the higher the origination cost)
- Any inspections you order (typically Bay Area sellers pay for inspections as part of their disclosure packet)
- Attorney fees (not particularly common in a standard SF home purchase)
- Loan discount points (home borrowers typically have the option of paying “points” at closing in exchange for a lower mortgage rate. One point equals one percent of the loan amount. So if you pay one point on a $600,000 home loan, you’ve increased your closing fees by $6,000)
- Proration of mortgage payment based on the closing date
- Proration of property tax based on the closing date
- Bay Area transfer tax (varies by city and county)
- Title search and insurance (title companies examine the title (ownership) of the home you are buying to ensure there is no conflict that might result in future liens or disputes. They charge a fee for this service, which is often added to the home buyer’s closing costs)
- Property survey (this survey shows the exact size and layout of the property and lot. Mortgage lenders review these documents to ensure the home is not encroaching onto another property. If there’s already a current survey, the lender might not order a new one. If a survey hasn’t been performed for a while, a new one will be requested. The cost can vary, but it’s usually a few hundred dollars)
- Document preparation
- Escrow fee
- Notary and courier fees
- Homeowner’s insurance (your Bay Area mortgage lender will likely require you to have a homeowner’s insurance policy in place before closing on the home. Lenders typically require the first year’s insurance premium to be paid on or before closing day)
- Move-in fee (for some larger condo buildings)
- Homeowner’s association fees, if any, prorated on the closing date
Ready to More Forward?
Are you planning to buy a home in the Bay Area? Do you need a mortgage loan to help finance your purchase? Torii is here to help!