When buying a home in Los Angeles, you will need to consider your closing costs as well as your downpayment. So what are closing costs? They are the miscellaneous fees involved in your purchase which can average between 2-5% of the purchase price.
Your lender will provide you with a Good Faith Estimate (GFE) when factoring in your loan and at the end of the escrow process you will receive a HUD-1 with an explanation of the final closing costs.
Below is a rough explanation and estimate of closing costs should you be acquiring a mortgage:
- Origination fee for loan approximately (negotiable)
- Points. This will lower your interest payments for the length of the mortgage. For example one point will lower your interest rate by approximately 1.25%. To decide whether to buy points will depend on the length of time you intend to keep the mortgage. A quick calculation to see if the points are worth it will be to deduct the monthly amount with the points from the monthly amount without the points and divide that into the amount you will be paying for the points at closing. That is the number of months you will need to keep the loan to break even.
- Hopefully you will be putting down at least 20% as a downpayment. If not you will have to pay Private Mortgage Insurance (PMI). The less you put down the higher your PMI payments. P.M.I. is roughly from .3% to 1.15%, depending on your down payment.
- Initial Interest: this is to cover the interest from the date of closing until the end of the month. If you close on June 15th, you will pay interest through the end of June. Your next interest payment will be August 1 for the full month of July.
- Title insurance and services: in California, the seller generally pays for the buyer’s title insurance. The buyer pays insurance to protect the lender from any claims against the home. You will also pay title service charges – paperwork, recording, etc.
- Property taxes: your lender will collect property taxes from you as part of your monthly payment. The tax in Los Angeles is around 1.25% of the purchase price.
- Appraisal: before approving a loan the lender will send out an appraiser to ensure that the property is worth the price. This generally costs between $250 – $350.
- Homeowners’ Insurance: (required by the lender).
Below is a sample escrow closing statement for a condo purchase in the amount of $685,000. This will give a of rough idea of what you might expect in terms of closing costs. This is based on the purchase of a condo which will include items related to homeowners dues.
|New 1st Trust Deed||$548,000.00|
|Origination Charge ( to Lender)||$995.00|
|Appraisal Fee (to Lender)||$450.00|
|Credit Report (to Lender)||$25.00|
|Interest at $58.18/day from 04/18/2013 to 05/01/2013||$756.32|
|Property Taxes at $713.54/mo x 5 months (to Lender)||$3,567.70|
|Taxes at $3,856.70 (semi-annually) from 4/19/2013 to 7/1/2013||$1,542.68|
|HOA at $390.60/mo from 4/19/2013 to 7/1/2013||$156.24|
|Closing Costs Credit**||$900.00|
|Monthly dues for May (to HOA Mangement Company)||$390.60|
|Courier/Overnight Handling Service||$125|
|Third Party Notary for Signing Service||$75.00|
|TITLE/TAXES RECORDING CHARGES|
|Owners Title Policy (to Title)||$1,730.00|
|Reimbursement form Seller for Owners Title Policy (to Title)||$1,730.00|
|ALTA Loan Policy + Endorsement (to Title)||$725.00|
|Sub Escrow Fee (to Title)||$62.50|
|Buyers Closing Funds (to Title)***||$102,631.64|
|Recording Trust Deed (to Title)||$73.00|
|Documentary Transfer Tax (to Title)||$753.50|
|Reimbursement from Seller for Documentary Transfer Tax (to Title)||$753.50|
|City Transfer Tax (to Title)||$3,082.50|
|Reimbursement from Seller for City Transfer Tax (to Title)||$3,082.50|
|Escrow Fee (to Escrow)||$1,390.00|
|Loan Tie-In Fee (to Escrow)||$295.00|
* Lender credit towards closing costs. Good if buyer doesn’t have enough to cover closing costs, but it will result in a higher interest rate.
**Generally offered to the buyer at closing to fix any outstanding repairs or defects.
*** These are the total closing costs including the balance of the buyer’s downpayment.
More Frequently Asked Questions:
What Can I Afford?
What are the Closing Costs?
How to Read an MLS Listing
What are the Different Listing Statuses?
Understanding the Purchase Agreement
What is Title Insurance?
How to Take Title
Should I Buy a House or a Condo?
What is Escrow?
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