The total cost of a home in California goes beyond the listed price for the property. Closing costs will also need to be factored into the equation to determine the affordability of a home purchase. The term “closing costs” simply refers to all expenses related to the final step involved with completing a real estate transaction. Such costs are typically shared by both the buyer and seller.
The way closing costs related to the purchase of a residential property will be divided among the buyer and the seller will depend, in part, on results of the negotiation process. The mortgage lender usually provides an estimate for the buyer. Financial terms for the loan will be spelled out in the loan contract. The buyer will also receive a closing disclosure statement from the lender shortly before the settlement date.
Closing costs for the buyer typically range from 2 to 5 percent of the total price of the property. Such expenses are usually related to mortgage loan application processing, inspection and appraisal, title search, escrow and home property insurance. Mortgage broker commission, title insurance costs, some fees that aren’t mandatory, such as home warranty fees, and sales commissions that may be up to 6 percent of the purchase price are among the closing costs property sellers are normally expected to cover.
An attorney may be able to help a buyer minimize expenses associated with a real estate closing by mediating negotiations with the seller. Possible outcomes include convincing the seller to cut closing costs or rolling those costs into the long-term cost of the mortgage for the home. If this option is preferred, a buyer may want to ask a lawyer to review the mortgage loan contract to determine if the lender has the right to raise interest rates to recover costs.