Whether you’re a buyer or a seller, the whole business of closing costs can both confusing and intimidating. And then there’s the aggravation for buyers of having to pay closing costs on top of the tens or hundreds of thousands of dollars they paid for the home, sometimes as much as 3%, and for sellers of losing that amount if they wind up having to pay closing costs for a buyer. So to make it a pill that’s a little easier to swallow, here’s a breakdown of closing costs for homes in the Inland Empire according to the various aspects and segments.
To cover the cost of processing the application, along with credit checks, your lender will require a loan-application fee. The amount of this fee varies by lender and amount of time and work involved. In addition, if you make a down payment of less than 20%, you may also have to get private mortgage insurance, and that could require an application fee as well.
The origination fee (also known as an administrative fee or underwriting fee) is the largest of the loan costs and a good percentage in the breakdown of closing costs for homes in the Inland Empire. The origination fee’s purpose is to defray the lender’s expenses involved in evaluating and preparing the mortgage loan, including notary fees, attorney fees, and document-preparation costs. Generally, it amounts to about $1,000-$2,500 of the loan amount.
Lenders sometimes require an advance payment of the first year’s mortgage-insurance premiums, which usually ranges from 0.55% to 2.25% of the sale price depending on the loan type.
Most lenders will also require payment of the interest accruing during the period from the date of settlement to the due date of the first monthly payment.
Your lender will certainly require an appraisal – and inevitable part of the breakdown of closing costs for homes in Inland Empire – to ensure that the home is, in fact, worth the amount you want to borrow to purchase it. This protects the insurer in case of default. The cost of an appraisal by a certified appraiser usually runs around $400 to $550.
It’s also pretty certain your lender will require an inspection to make sure the house is structurally sound, up to code, and has no major problems, again ensuring their protection if you should default. The average for home-inspection fees is in the range of $300 to $400. Inspecting for mold, radon, lead-based paint, and other tests are usually an extra fee and not all home inspectors are certified to do all tests. Check with your home inspector if you are concerned about a certain aspect of the home to make sure they’re able to test for that item.
Most lenders also require title insurance as protection against errors in the title search that would allow people other than the seller claim ownership after the deal has been finalized. There are different options of title insurance in California such as Standard Coverage or Residential Owners Policy, as well as ALTA Homeowners Policy as well as a Concurrent Loan Policy. The differences should be explored with a Title Insurance company such as Orange Coast Title where they describe the different policy types and even provide an interactive rate calculator. Title policy prices for an average priced Inland Empire home at $380,000 will cost anywhere between $1,171 for a Standard Policy to $1,289 for an ALTA Homeowners Policy. Fees usually vary based on zip code as well as purchase price of the home.
Insurance, Taxes, and Association Fees
Your lender will most likely require you to have homeowner’s insurance – also known as fire insurance – before settlement so that their investment is protected against any kind of damage or loss. The cost varies depending on a number of factors but is always higher in areas vulnerable to natural disasters like floods. This often comes as a surprise to many people when first encountering the breakdown of closing costs for homes in Inland Empire. Some insurance quotes we routinely see are anywhere between $700/year and up to $1,500/year for premium coverage. As with all insurances, there are bare-bone plans as well as plans that offer more “bells and whistles”. Homeowner’s insurance is normally pre-paid for 1 year, and an additional one or two months of pro-rated charges are normally charged as part of the closing costs to be put into the lender’s impound account. For a $700/year policy, if a lender requests 2 months of impounds, that would be the equivalent to $116 in impound fees, in addition to your first year of fire insurance coverage which would equal a total of $816 towards your fire insurance closing costs.
Also, you can generally count on paying a minimum of at least two months’ worth of both city and county property taxes, and up to nine months worth of property taxes. These payments go to the lender’s impound account as well. The amount could range from relatively little to something pretty hefty, depending on the size of the home and the area. On a property selling for the median price of $380,000 with no mello-roos, you can expect to pay an estimated $350/month in property taxes, so your property tax impounds could be anywhere from $700 for two months, up to $3,150 for a nine month impound. The difference between paying 2 months or 9 months of impounds depends on the month you close escrow relative to when your first property tax payment occurs. Consult with your escrow or title agent to get an impound chart for California.
Another frequently unexpected piece in the breakdown of closing costs for homes in Inland Empire is the fact that if you buy where there’s a homeowner’s association in place, you may have to pay the annual fee ahead of time in one lump sum at closing.
Closing costs are not insignificant, but this breakdown of closing costs for homes in Inland Empire may help you understand why. The best way to safely navigate the minefield of closing costs is with the help of a qualified real estate professional.