What to Expect for Closing Costs as a Buyer

Closing costs are the fees paid at the end of a real estate transaction when the title is transferred from seller to buyer, which are usually required to be in the form of a cashier’s check. According to federal guidelines, all closing costs associated with residential transactions financed by a mortgage must be documented within an HUD-1 form, a standard itemization document. Although lenders are legally required to give you a good faith estimate of closing costs when you apply for a loan, many of the fees could end up being greater than estimated.

The typical closing cost is between 2-5% of the purchase price. In California, the average amount of closing costs paid in 2015 came to $1,843. Below is a breakdown of the most common expenses reflected in the total closing cost. Keep in mind these may differ slightly based on where the property is located:

Origination fees (charged by lender):

  • Tax service
  • Document preparation
  • Broker or lender

Third-party fees

  • Credit report
  • Attorney, closing, or settlement
  • Home inspections
  • Survey (verifying property lines)
  • Postage or courier
  • Flood certification

In some circumstances, it’s common for sellers to pay part of the closing costs that would normally fall on the buyer. That’s why you should consider the assistance of an experienced real estate agent, who may be able to help you negotiate for seller-paid closing costs. There may very well be room for negotiation, but keep in mind that this may also come at the price of a higher interest rate.

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