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18 min read Jan 18, 2023

How Much are Closing Costs for Buyers in California?

Closing Costs for Buyers in California

Average closing costs in California for buyers tend to be between 2%-5% of the sales price. Currently, the average home price in the state is $763,000. This means a buyer may end up paying $15,260-$38,150 as closing costs.

Key Takeaways

  • Closing costs, also known as “settlement costs,” are the final expenses to complete the real estate transaction.
  • Closing costs are separate from the price of the property.
  • Due to local tax rates, closing costs for buyer in California also depends on where the buyer lives.
  • The buyer can negotiate certain closing costs with the seller and the lender.


What are Closing Costs California?

Closing costs in California are a set of expenses that the seller and the buyer must pay to finalize the real estate transaction and transfer the ownership of the house.

» How Much are Closing Costs in California: Read all about how much closing costs are paid by sellers and buyers in California.

Who Pays Closing Costs in California?

Both sellers and buyers pay certain closing costs when finalizing the real estate transaction.

In some cases, the seller may offer to pay the buyer closing costs to improve the prospects of selling their home faster. They may also offer to cover an incentive for buyers to remove certain terms and contingencies from the sales contract.

» How to Sell My House Fast in California: Know How to Sell Your House Fast in California and for the Most Cash!

Typical Closing Costs for Buyers in California

If you are a buyer, here are some closing costs you may have to pay when buying a house.

1. Application Fee

Application fee is an upfront fee lenders charge when you submit your loan application. Mortgage lenders in California typically charge 0.5%-1% of the loan amount as an application fee.

This is a non-refundable charge. So, you will not get this money back even if your loan application is rejected. Some lenders collect application fee as a deposit for closing costs, while others charge it as a separate fee.

Not all lenders charge an application fee.

2. Appraisal Fee California

It is a common practice for lenders to hire an appraiser to determine the fair market value of the property you want to purchase before granting the loan amount. This helps them determine the loan amount and the loan-to-value ratio.

The appraiser has to be compensated whether the mortgage gets approved or rejected. Hence, the California home appraisal fee needs to be paid upfront.

Your real estate agents may include an appraisal contingency clause in the sales contract, especially if you need a mortgage. This gives you the right to walk away with your earnest deposit if the appraised home value does not match the agreed-upon price.

3. Attorney Fee

The state of California does not mandate the presence of a real estate attorney at closing. However, you may hire a real estate attorney if the transaction is unusual or complex. Some instances where the services of a real estate attorney can prove helpful are joint ownership of the house, private loans from family or friends, the presence of easements on the property, etc.

Real estate attorneys draft and review the purchase agreement and transfer of title on behalf of the lender while also offering advice on negotiations.

The attorney fee depends on your area of residence in the state and the number of hours of service you require.

4. Closing Fee/ Escrow Fee California

The escrow or settlement agent charges a closing fee for the disbursement of funds between the buyer and the seller. Your settlement agent in California will depend on where you are purchasing property in the state.

If you are in Northern California, the closing settlement will be performed by the title insurance company. On the other hand, if you are in Southern California, you will have to recruit a separate escrow firm and an insurance company.

So, who pays escrow fees in California? The buyer and seller split the escrow fee evenly in both regions of the state. The next question that arises is, how much are escrow fees in California? The buyer and seller have to pay 0.2% of the sales price + $250 each as an escrow fee.

5. Courier Fee

The courier fee covers the cost of sending the documents to various parties. The buyer pays courier fee.

6. Credit Reporting Fee

Credit reporting fee is the cost of obtaining a credit report. The lender will analyze your credit report to estimate your ability to pay back the mortgage. They may request your credit report multiple times during the loan application process to ensure there is no negative changes.

If you are sharing the mortgage with another borrower, the lender will request their credit report as well.

7. Discount Points/ Mortgage Points

You can lower or buy down your mortgage interest rate by purchasing discount points from the lender. It is a prepaid interest you can pay upfront to lower your monthly mortgage payments.

The lender charges a fee to lower a set amount of interest rate called points. The value of discount points is based on the type of loan and prevailing mortgage rates and is decided by the lender. Generally, one discount point can be bought for a fee of 1% of the mortgage amount. Typically, lenders slash the interest rate by 0.25% for every discount point.

8. FHA Mortgage Insurance

All FHA loans require mortgage insurance. If you are opting for this type of loan, you are required to pay an upfront premium and an additional annual fee. The amount of these payments is based on the size of the loan.

FHA loans are designed to help moderate-income buyers with lower credit scores become homeowners. It is insured by the Federal Housing Administration (FHA).

9. Flood Certification Fee

If the property you intend to purchase is in or around a flood zone according to the Federal Emergency Management Agency (FEMA) maps, you must acquire a flood certification. This report is used by the lender to determine if special flood insurance is required.

10. HOA Transfer Fee California

If the seller is a part of the Homeowner Association, at the time of closing the ownership of the house needs to be transferred from the seller to you in the HOA records. HOA transfer fee is a one-time non-negotiable charge you must pay the HOA to update their records.

11. Homeowner’s Insurance

Most lenders require you to purchase homeowner insurance before they finance the loan as it protects their investment. Homeowner’s insurance premiums are usually a part of the escrow funds.

California law mandates homeowners to have insurance that covers fire damage caused or followed by an earthquake.

12. Lead-based Paint Inspection

If you are purchasing a house built before 1978, you must get a lead-based paint inspection done. The cost of the inspection varies according to the size and location of the property.

California law requires sellers to disclose any known lead hazards and make inspection reports available to you, the buyer.

Moreover, according to the Residential Lead-Based Paint Hazard Reduction Act of 1992, you can conduct a lead-based paint within 10 days of signing the contract. If lead hazards are identified, you can cancel the contract without any penalty. Some buyers may waive off this right.

However, the law does not require the seller to conduct or pay for the inspection.

13. Lender’s Title Insurance

Mortgage lenders will require you to purchase a lender’s title insurance. It protects them against loss over potential defects in the title or legal claims over the house. The lender’s title insurance must cover the full amount of the loan.

» Lender’s Title Insurance Cost in California: Find out all about lender’s title insurance in California

14. Loan Origination Fee

Once the mortgage has been approved, the lender charges an upfront loan origination fee to process the loan. The lender will inform you about this charge before the loan is processed.

15. Mello-Roos Tax

Mello-Roos Tax is an ad-hoc district tax levied only in California. It is an additional financial tool that can be used by the city, county, or school district to develop infrastructure. This tax is collected only in areas that benefit from the project.

Mello-Roos Tax is usually under 2% of the home value.

You can ask your real estate agent or the seller if the property is in a Mello-Roos Community Facilitated District (CFD).

16. Mortgage Escrow Account/Impound Account

The lender may open a new escrow account or use the previously established one to pay the property tax and premiums homeowners insurance and mortgage insurance. The escrow funds are deposited from the monthly mortgage payments. The impound account is managed by a mortgage servicer who will make the payments on your behalf.

An impound account is not mandatory according to California law. However, a mortgage lender can establish a mortgage escrow account under certain conditions. Some of these are, failure to pay property tax installments for two consecutive months, opting for an FHA or VA loan, a loan amount of 90% of the appraised value, and higher-priced mortgage loans.

» Top Mortgage Brokers in California: Read to know about California mortgage brokers.

17. Owner’s Title Insurance

Who pays owner’s title insurance in California depends on which part of the state you are buying property in. In northern California, you may have to split the owner’s title insurance with the seller evenly. On the other hand, in southern California, the seller pays for the owner’s title insurance.

The average owner’s title insurance cost California is 0.4% of the sales price.

» What Does Title Insurance Cover in California: Click to find out.

18. Private Mortgage Insurance

If you opt for a conventional loan and make a down payment of less than 20%, your lender will require you to buy Private Mortgage Insurance (PMI). The average rate of PMI for conventional loans in California can range from 0.5%-1.86 % of the original loan amount.

You can choose to pay the complete or a partial amount of PMI upfront to lower your monthly mortgage payments.

19. Pest Inspection Fee

A pest inspection is usually required if the appraiser observes any signs of structural damage due to pest infestation. However, some lenders require an official report of inspection before approving the mortgage.

In California, a pest inspection is required before a VA loan can be closed.

20. Prepaid Daily Interest Charges

The monthly mortgage payment is due on the 1st of every month, starting 30 days after closing. However, the interest on the mortgage starts accumulating from the day of closing itself. You must pay the accrued interest from the closing day to the first mortgage payment as closing expenses. These are called prepaid daily interest charges.

So, for instance, if you purchase a house on the 4th June, your first mortgage payment will be due on the 1st August. You will have to pay the accrued interest on the loan from 4th June to 31st July at the time of closing.

21. Property Tax

Homeowners pay property tax to the local government. The amount of property tax is proportional to the market value of the house. Buyer property tax starts to accrue from the day of closing.

In California, property tax is capped at 1% of the home’s assessed value at the time of purchase.

Lenders often require buyers to pay one year’s worth of property tax in advance at closing. These funds are usually collected and paid via the escrow account.

22. Rate Lock Fee

A rate lock fee is the cost of fixing the mortgage interest rate at a specific price for a set period. Locking the interest rate keeps you safe from market fluctuations. Once the rate lock period expires, most lenders charge an additional fee to extend it.

While a rate lock can save a significant amount of money in interest, it is important to note that lenders can void the rate lock at any point if your debt-to-income ratio increases and your credit score declines.

23. Recording Fee:

A recording fee is paid to the local government to register the change in ownership of a house or sale of a property in the public record. It also records mortgages and other liens against the house. It is usually charged by the county.

In California, transfer tax and recording fee are charged separately for the transfer of property.

24. Survey Fee

A survey fee is paid to a professional surveyor who creates a drawing of the property highlighting its boundaries, easements, improvements, and the physical features of the land, like home elevation, etc. It will give you a better idea of the property you are buying in an official and legal capacity.

While land surveys are not mandatory in California, lenders and title companies may at times require the report to issue lender’s title insurance.

The survey fee depends on factors like the dimensions of the property, its terrain, and accessibility.

25. Tax Monitoring/Tax Status Research Fee

A tax monitoring fee is paid to a tax service agency that monitors if you pay the property tax on time. The tax service agency alerts the lender in case you default. It is also sometimes referred to as a tax service fee.

Lenders opt for tax monitoring to prevent tax liens and protect their access to the property.

26. Title Fees California

A title agency charges a title search fee to determine the legal ownership of a property by examining public records like deeds, tax liens, land records, court judgments, etc. The title search helps discover any liens or claims on the property that the seller may also be unaware of.

27. Transfer Tax

Transfer tax is levied by the municipality, county, or state to the transfer of ownership of the house from the seller to the owner. The tax amount is based on the market value of the property. The transfer tax is also called deed tax, mortgage registry tax, and stamp tax.

As mentioned earlier, in California, transfer tax and recording fee are charged separately for the transfer of property. Moreover, in California, you have to pay separate county and city transfer taxes. The current county transfer tax rate is 0.11% according to the California Revenue and Taxation Code.

So, who pays county transfer tax in California, and who pays city transfer tax in California? Usually, the seller pays both transfer taxes. However, the buyer must pay the transfer tax if the seller does not or if it has been negotiated as a buyer closing cost in California.

» How to Stop Foreclosure in California: Want to know how to stop foreclosure in California? Here’s a guide.

28. Underwriting Fee

Mortgage underwriters charge an underwriting fee to evaluate and verify loan applications. It is a one-time fee Some lenders charge it in place of the originating fee, while others charge it in addition to the same.

29. VA Funding Fee

The VA funding fee is a one-time fee paid to the Department of Veteran Affairs (VA) that runs the VA loan program. The VA fee you have to pay depends on the down payment they make for a property. if you make a down payment of less than 5%, you have to pay a VA fee of 2.3% for your first home and 3.6% on any subsequent homes.

Down PaymentVA Fee for 1st Loan VA Fee for Subsequent Loans
Less than 5%2.3%3.6%
5% or more1.65%1.65%
10% or more1.4%1.4%

Average Closing Costs for Buyers in California

Buyer Closing CostFee
Application Fee$300-$500
Appraisal Fee$300-$600
Attorney Fee$150-$400 per hour
Closing/Escrow Fee0.2% of property price + $250
Courier FeeVaries according to location
Credit Reporting Fee$8 per report
Discount Points1% for 1 discount point
FHA Mortgage InsuranceVaries according to loan amount
Flood Certification Fee$15-$25
HOA Transfer Fee$100-$400
Homeowner's Insurance$144 per month
Lead-based Paint Inspection$250-$700
Lender's Title Insurance0.1% of the sales price
Loan Origination FeeLoan Origination Fee0.5-1%
Mello-Roos Tax< 2% of home value
Mortgage Escrow Funds1-2% of sales price
Owner's Title Insurance0.4% of the sales price
Private Mortgage Insurance 0.5-1.86 % of loan amount
Pest Inspection Fee $500
Prepaid Daily Interest ChargesVaries according to mortgage amount
Property Tax1% of sales price
Recording Fee$225
Rate Lock Fee0.25-0.5% for 60 days or less + 0.06-0.37% for extension
Survey Fee$200-$500
Tax Monitoring/Tax Status Research Fee$50
Title Search Fee$150-$250
Transfer Tax0.11% of home value
Underwriting Fee$400-$900
VA Funding Fee0.5-3.6% of loan amount

How to Reduce Closing Costs?

1. Opt for a real estate broker who offers a rebate program

Some real estate brokers may offer you incentives like rebates that help lower closing costs and/or buy down the mortgage interest. Real estate agent services are free for buyers as sellers pay the agent commission for both parties.

2. Compare lender mortgage rates

You can compare lenders to choose the one offering the best mortgage rates and benefits. If you have a preferred bank, you can also negotiate the mortgage rate with them. Further, if you have received an offer with a lower rate from a different lender, you can share it with the preferred bank and ask if they can match or beat it.

3. Compare loan estimate forms

Lenders are required to give you a loan estimate form within 3 days of completing the loan application. The document list all costs, including the loan amount, interest rate, and monthly payments. It also has a section called “services you can shop for,” where you can compare various lender-preferred vendors. Nonetheless, this does not mean that you cannot opt for independently chosen vendors.

However, it must be noted that independently choosing vendors carries the risk of increased closing costs if they increase their pricing before closing. Lender-provided vendors are not allowed to change their prices by more than 10% from the original quote.

4. Negotiate lender fee

As mentioned above, some lenders charge origination and/or underwriting fee. You can request the lender to waive these fees or negotiate a lower charge.

5. Close at the end of the month

By closing at the end of the month, you can save on the prepaid daily interest charges.

Here’s you can calculate the prepaid daily interest savings:

Step 1: Multiply the loan amount by the interest rate. For instance, if the rate is 5 percent, multiply by .05. This will give the annual interest expense.

Step 2: Divide the annual interest expense by 360 to get the daily interest charge.

Step 3: Multiply the figure calculated in the previous step by the number of days left in the month plus the first day of the following month.

6. Opt for the no-closing cost option

You can avoid paying closing costs at the time of closing, especially if you are strapped for cash, by rolling these costs in the mortgage. However, lenders that offer this no-closing cost option charge a higher interest rate in exchange for it.

7. Minimize requests

Making demands can make the deal slow and troublesome for both parties. You should make minimal requests, so the seller is more willing to cover some of the closing costs. If there are too many inconveniences, the seller may question your genuineness and feel a need to back out.

8. Make it quick and hassle-free

Most of the sellers aren’t happy dealing with the lengthy transaction. As much as possible, you must keep the transaction straightforward without beating the bush.

9. Ask the seller to cover closing costs

Depending on the market conditions, you can negotiate the deal with the seller by requesting them to cover some of the closing costs for buyers in California or offer credits towards closing costs.

Closing Cost Calculator California

Closing costs vary heavily according to location and mortgage rates. Houzeo’s Closing Cost Calculator is a free tool that factors in these elements to help sellers and buyers estimate their closing costs. It shows the user a detailed list of itemized costs and also highlights junk costs that can be avoided.

Houzeo’s Closing Cost Calculator is frequently calibrated to give sellers and buyers the closest estimate according to market conditions.

» Buyer Closing Costs California Calculator: Check your closing costs now!


Developing an understanding of closing costs for buyers in California is important for you as it can help you estimate your financial affordability and discover where you can save. Ultimately, this can have a great impact on choosing the property you can purchase and the total amount you spend.

If you have not begun your real estate journey yet, opt for Houzeo., a tech company, provides an unbeatable combination of maximum savings, cutting-edge technology, and 5-star customer support. With its 100% virtual service, it helps home sellers list their property without any hassle from the comfort of their homes, while also allowing home buyers to explore properties and make offers online. Houzeo’s customer-centric approach, advanced technology, and flat fee packages make it an ideal choice for those looking to avoid paying high commissions and closing costs.

Frequently Asked Questions

1. How long does recording take after closing in California?

Usually, the recording of deed in California takes place on the same day as closing. However, it may take longer if the documents are submitted late on a Friday or around a holiday.

2. Are HOA fees tax deductible in California?

HOA fees are not generally tax deductible. However, if you are self-employed and have a home office or use part of your home to store inventory, you may be able to write it off in your taxes. HOA can also be tax deductible if you rent the house.

3. How is closing cost for buyers in California calculated?

Closing costs are a sum of specific settlement expenses. These vary according to the location, mortgage rates, and market conditions. Houzeo's closing cost calculator is a free tool buyers can use to get a close estimate of their settlement costs.

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