When you purchase a home or other real property in San Diego there will be fees associated with the purchase, let’s break them down below…
The “closing” occurs when the seller transfers the title of the property to the buyer.
Both the buyer and the seller will incur closing costs. Remember, some fees are negotiable and some are favorable to one side, if you have a specific question you can contact us.
What are San Diego Real Estate Closing Cost Terms You Need to Know?
A complete list and explanations of typical closing costs terms are provided below.
TERMS YOU NEED TO KNOW
What kinds of fees can you expect to pay at closing?
The type of property you buy along with the type of loan you choose affects the fees you will pay. The following is a list of all closing cost terms; however, you may not have to pay all of them.
- APPLICATION FEE: This is the fee you will pay to apply for a loan. this is also known as a loan “processing” fee. Lenders will run a credit check to see whether you qualify for the loan.
- APPRAISAL: A professional appraisal company will determine the fair market value of the home or real property.
- ATTORNEY FEE: An attorney will review all the closing documents on behalf of the lender or the buyer.
- CREDIT REPORT: The lender will purchase a credit report to determine the buyer’s credit history and the credit score (a number which determines creditworthiness or risk). The credit score determines how high the loan’s interest rate will be.
- COURIER FEE: This fee pays for the transportation of all documents required to obtain the loan.
- ESCROW OR CLOSING FEE: Either an escrow company, a title company, or an attorney will conduct the closing. It is the job of the escrow company to handle all funds in a real estate transaction. in San Diego, buyers and sellers usually pay their own escrow fees. The fee for each party is based on the purchase price of the home, which is $2 per $1,000, plus a $250 base fee. Additional fees may include a courier service, document preparation, and other services provided over the course of the escrow.
Here is a link for Open Escrow, they are our preferred escrow company.
- PROPERTY TAXES & MORTGAGE INSURANCE DEPOSIT: buyers will be asked to pay two months of mortgage insurance and property taxes as a deposit with the closing agent.
- HOME INSPECTION: the home will be inspected by a professional to determine its condition and what home repairs are needed before the closing.
- FLOOD DETERMINATION: a professional will be hired to see if the home is located in a flood zone. If it is, the buyer will have to purchase flood insurance for the life of the loan.
- FHA UP-FRONT MORTGAGE INSURANCE PREMIUM (UFMIP): if you obtain a fha loan, the ufmip will have to be paid, which is 1.75% of the actual loan amount. You have the option to include this within the loan payments to avoid paying upfront.
- HOMEOWNERS ASSOCIATION TRANSFER FEE: if you are purchasing a condominium or a home within a closed community of homes, the seller pays for the transfer of association membership to the buyer. This proves that dues are currently paid and shows what the dues are and includes a copy of the association’s financial statements and other important notices. Buyers need to look at these documents to make sure the association holds enough reserves to pay for expected maintenance and repairs of all the common areas (lobby, elevators, gym, pool, social area, etc.). Also look for any “special assessments” like pending lawsuits or other expenses. The association rules, regulations, by-laws, and cc & r’s (covenants and restrictions of use) should also be provided.
- HOMEOWNER’S INSURANCE: this is an insurance policy covering damages to your home. Normally, the first year’s coverage is paid at the closing.
- OWNER’S TITLE INSURANCE: this is usually an option which protects you in case someone challenges your home ownership.
- LENDER’S TITLE INSURANCE: your lender will have insurance protecting the property’s title. It covers problems affecting clear title such as boundary disputes and prior liens not paid at the closing.
- ORIGINATION FEE: this pays for the lender’s administrative costs. Normally, it is around 1% of the total loan. There are some mortgages with no origination fee.
- PEST INSPECTION: this covers the costs of inspecting for termites and dry rot which is required for all government loans and in most states. Necessary repairs can be expensive if termites are discovered or wood damage like dry rot.
- PREPAID INSURANCE: many lenders require prepaying any interest accruing from the closing to the date of your first mortgage payment.
- PROPERTY TAX: normally, lenders require that any property tax due to be paid within the first 60 days of the purchase, to be paid at the closing. You can calculate your property tax with this property tax calculator.
- PRIVATE MORTGAGE INSURANCE (PMI): if your down payment is less than 20% of the home’s total purchase price, you must obtain a pmi and pay the first month’s pmi at closing.
- RECORDING FEES: the filing of all legal documents like the title deed at the local government recording office (county or city) requires a fee to be paid at closing,
- SURVEY COSTS: a professional survey company may be required to inspect the property’s boundaries verifying that all fences and property lines are not shared with neighbors.
- TITLE SEARCH: the title company investigates the property’s public records including the title deed verifying no one has made any claims against full title to the property.
- TRANSFER TAX: this is a tax paid when the title transfers from the seller to the buyer.
- UNDERWRITING FEES: this is a lender’s fee for investigating whether you qualify in order to approve you for the loan.
- VA FUNDING FEE: a veteran’s administration (va) loan requires paying a fee at closing. You have the option to include this fee in the mortgage to be paid over the life of the loan. There are exemptions from this fee which is a percentage of the loan amount. This is a list of the costs for a va funding fee and a list of all fees for va loans.
SAN DIEGO CLOSING COST FEES
Now that you know the fee terms related to the home buying and closing process, let’s look at some average fee amounts for closing costs in San Diego.
- Loan origination fees: 1 or 2 percent of a loan total
- Loan processing fees: flat fee $400
- Underwriting fee: flat fee $500
- Appraisal fee: a flat $450
- Credit check: $25-35
- Flood area certification: $50
- Servicing for escrow account: $75
- Title insurance: $175
- Filing cost for title fees: $180
- City recording fees: $125
- Transfer tax in California: $1.10 per 1k of total sale amount
- Homeowner’s insurance: $1,000-$1,500 a year
- Escrow processing: $175 on average
- Wire and courier services: $175
Overall closing costs on any real estate transaction depends on the type of property, final sales price, and what the terms of the purchase agreement are between buyer and seller.
The final closing costs are calculated after the close of escrow.
What is Lender Payoff?
If you want to add the lender payoff into your overall calculation of closing costs, here is what you need to consider.
If you owe on the house you are selling, your lender will collect any principal balance, unpaid interest, and also may charge additional fees to close the account. Additional fees may include:
- DEMAND|STATEMENT FEE – cost to provide a payoff amount to the escrow company.
- RECONVEYANCE|RELEASE FEE – cost to close the loan and to release the lender’s interest in the property.
- RECORDING FEE – cost to record the deed at the county recorder’s office.
- Any unpaid late fees
Documentary Transfer Tax
In California, the seller pays the Documentary and Property Transfer Tax, which is usually $1.10 per $1,000 of the purchase price. Some cities have higher rates. This tax is split between the County and the City.
The Fine Print
Buyers have a list of things for the seller to do in order for them to follow through on the purchase of the home.
There are termite inspection costs, one year home warranty, natural hazard disclosure report, and complete repairs for common household things like a plumbing leak, replacing a roof, or clearing a termite infestation and repairing termite damage.
After inspections are completed, this is the time when buyers and sellers negotiate the fine print line items.
You can estimate what your costs will be with your agent. With the right agent, you will know where every penny is being spent… every step of the way.
To find the best real estate expert in San Diego to help you through the home buying or selling process, choose the Inc. 500 Fastest Growing Brokerage in America!
Guest Blogger Steven Rich, MBA
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