What are Closing Costs?
When you decide to buy a home in Laguna Beach, California, the real estate transaction will not only involve you and the seller, but several other parties as well. These professionals charge fees that result in additional costs that you may have to pay during the settlement of your home purchase. These service fees and taxes which are due upon the settlement, or closing, of a real estate transaction are what we call closing costs. Both buyer and seller are responsible for certain closing costs, and who pays for what depends on the negotiations between the two and also on the location of the home that has been sold. The fees and legal requirements involved in a home purchase differ for each state and municipality, so it is best for homebuyers to learn about the closing costs in a particular location before they make an offer.
Average Closing Costs in Laguna Beach, CA
California’s closing costs are the sixth highest in the nation, next to Washington DC, New York, Maryland, Delaware and Pennsylvania. Considering the high-end real estate in this region and the fact that houses and land lots make up the majority of the market, this rank is not so surprising. In the Golden State, homebuyers’ closing costs range between 2% and 3% of the property’s selling price, while closings costs for sellers range from 5% to 9%.
So, if you buy a house for $800,000, your total closing costs could amount to about $16,000 to $24,000. There are two types of closing costs for homebuyers – one-time (non-recurring) costs and recurring (pro-rated or ongoing) costs. Non-Recurring fees are those that are paid only once, during the closing or settlement of your real estate transaction. Recurring or pro-rated fees, on the other hand, are expenses that buyers pay over the course of home ownership.
Breakdown of Closing Costs in Laguna Beach, CA
List of Standard Closing Costs for Homebuyers in Laguna
• Title Insurance
• Notary Fees
• Recording Fees
• Lender Fees
• Loan Origination Fee
• Underwriting Fee
• Processing Fees
• Flood Certification Fee
• Discount Points
• Mortgage Insurance
• Property Taxes
• Hazard Insurance
• HOA Dues
List of Standard Closing Costs for Sellers in Laguna
What Can Laguna Beach, CA Homebuyers Do to Lower Closing Costs?
The list of closing costs for homebuyers can seem a bit confusing and having to go through each item can get quite overwhelming if you are a first time homebuyer. But keep in mind that you need to learn about these fees and
charges so you can plan the best way to negotiate with your seller and lending company, and consequently lower your total closing costs when possible. All the closing costs listed here are not set in stone, and there are a few things you can do so you can get a better deal from your home purchase.
1. Do Your Research About the Fees and Charges Included in Your Closing Costs
Being aware of the fees and charges involved at closing and knowing what they are is key to getting the best deal out of this transaction. With the right information, you will be empowered to negotiate into reducing or taking out certain fees that seem vague or unnecessary. While most of this information are readily available online, it is best to talk to an expert so that you are given proper advice. The seasoned professionals at Laguna Coast Real Estate can guide you and help you to obtain a sense of what is customary in the local area.
2. Consider Buying a Resale Home Instead of a Brand New House
While a lot of homebuyers may prefer to buy new construction, these would typically have a higher purchase price and, consequently, higher closing costs. So, instead of buying new construction, you may want to buy a resale home which may need some updating and repairs, but the overall costs may still be lower than buying a new house with higher closing costs. And, if the property has been well-maintained, you have the security of knowing that it has been “tried and tested” – having been lived in and taken care of, and so any major issues would have been addressed by the previous owner.
3. Shop Around and Request Quotes from Several Different Lenders
Lenders often use different terms for their list of closing costs and they also offer different rates. So, if you want to get the best rate, what you need to do is shop around for different lenders and request for a quote from each one of them. With a little extra time and effort, you may be able to save one-eighth percent to a half-percent of your loan. While this may seem to be a small percentage, a half-percent interest on a $500,000 loan would translate to a yearly savings of $2,500. A recent study shows that a homebuyer can save as much as $1,500 by getting one extra rate quote and at least $3,000 by reaching out to five different lenders.
4. Schedule Your Closing Date Towards the End of the Month
Another way you can further lower some of your closing costs, such as prepaid daily insurance charges, is by scheduling your closing date towards the end of the month. By doing this, your cash outlay for prepaid or “per diem” interest will be lower, as the number of days from your loan closing and the beginning of the next month is less. If you want to compute for your savings, multiply your loan amount by your interest rate then divide the result by 365 to get your daily interest charge. Next, multiply that figure by the days left in the month and the result will be the amount you’ll have to pay at closing. In effect, the lesser the number of days, the lower the interest you will have to pay.
Closing costs do not have to be daunting, even for first time homebuyers, if you understand what is required. If you are thinking of moving to Laguna Beach (or anywhere along the Laguna Coast) and buying a new home, we can help you throughout the entire process. From identifying and negotiating your dream home, navigating the escrow process, all the way through to the settlement of your home purchase. Feel free to give me a call at 949.494.0490
or send me an email at CynthiaAyers@cox.net and I will be happy to assist!