Buying a home is an incredible milestone in your life and a mighty leap towards a sound financial future. But there’s more to buying a house than the down payment and a monthly payment to your loan provider.
Some costs involved in buying a house include obvious expenses like the down payment and home insurance, but others are less visible, like appraisal costs, prepaid taxes, various insurance costs, pest inspections, and even notary fees.
To ensure you have complete transparency of what costs go into buying a home, our Southern California REALTORS® have put together a complete list. Read below for the 10 costs and fees you must factor into your home-buying experience!
The keystone to the cost of buying a home, a down payment is a percentage of your house’s cost that you pay to your loan provider. California homebuyers typically pay about 5.3% of the house’s cost, but a down payment can be anywhere between 3.5% and 20% of the house’s cost.
If you find a home you love, the sellers may ask you to pay what’s called “earnest money.”
Earnest money establishes your interest in the home and signals to the sellers that you won’t change your mind at the last minute. While there’s no hard-and-fast rule about the amount of earnest money, it’s typically between 1 to 5% of a home’s asking price—a lot like a security deposit on a rental.
Like a security deposit, the money will come back to you. You’ll get it back in cash or check, or the amount will go toward the purchase of your home—so long as you make good on your promises to buy the house.
Before you finalize your home purchase, it’s always wise to make an appointment with a home inspector. This is a crucial step when buying a house in California.
Home inspectors check the quality of the home to make sure it’s safe to live in. They look for things like lead, asbestos, and termites. Home inspections in California cost about $350, but depending on where your new home is, you may have to pay for other inspection costs:
Home appraisals are one of the most financially-savvy things you can do before buying a home. It provides a sound estimate of the value of the home so you can be sure you’re getting your money’s worth. It may also be required by your mortgage lender.
A single family home appraisal fee typically costs between $300 and $400, depending on the appraisal company you choose and the size of your property.
To close the deal on a house, you will have to pay closing cost fees that cover legal, loan, insurance, and home costs. A buyer’s closing costs add up to about 2-5% of the house’s purchase price. Take a look at the list below for an overview of exactly what buyer’s closing costs can entail:
You’re required to pay for fees associated with that change, outside of the deed tax.
Then, there are additional costs for title settlement, title insurance binder, and title insurance. Title insurance protects you from financial loss if the ownership of your new home ever comes under question.
In order to use escrow, you are required to pay a fee that will cover the cost of an escrow agent or the attorney who maintains and manages the transaction.
Depending on the deal you make with the seller, sometimes the seller will pay these fees, sometimes the homebuyer.
The lender will then pay the taxes on your behalf each month. Typically, this is meant to ease the final amount of your property tax bill when it comes due.
Throughout California, County Recorders are required to charge a fee for every real estate instrument, paper, or notice. That means any real estate transaction must be recorded for a fee of $75.
Depending on your lender and the type of loan you’ve taken out, you might be required to pay for mortgage insurance. Mortgage insurance is required for all FHA and USDA loans and might be necessary if your down payment is less than 20% of the home’s cost.
Additionally, your insurance company may require you to pay a mortgage insurance premium once you’ve closed on the home. Sometimes you can roll these costs into the home loan amount, but make sure you understand how those costs will affect your monthly mortgage loan payment.
An experienced real estate agent will be your best partner in securing the home of your dreams at the price you want. Ideally (and most often), real estate agent commission fees are paid by the seller.
However, depending on the real estate agent and the seller’s contract, the buyer might be responsible for your agent’s commission fees. Go over your real estate agent’s commission policy carefully before you sign with them.
Wondering how to find a good real estate agent? With Berkshire Hathaway HomeServices California Properties, you don’t need to worry. Our Southern California real estate agents have a wealth of experience and your best interests in mind.
Depending on the type of home you buy, you may have additional costs to factor into the home purchase.
A warranty will save you money in the long run, and keep your house well maintained.
Whether you’re buying an apartment in an urban center or an updated farmhouse out in the country, every new homeowner should have an emergency fund.
The costs of buying a house can be draining, but having a fund set aside for miscellaneous fees or in case you need an emergency fix can provide some much-needed cushioning in your finances.
Buying a home is a huge undertaking, both personally and financially. By educating yourself on the ins and outs of home buying and the costs associated with buying a home, you’ll be able to purchase a home you love with confidence.
Navigating the housing market and all of the costs of home-buying may seem formidable, but you don’t have to do it alone. Our Berkshire Hathaway HomeServices California Properties agents know the Southern California housing market inside-out and can help you understand every cent that goes into buying a home.
Find a trusted agent that’s right for you today and you’ll be on your way to homeownership in no time!
Reviewed by Dean Stalter
Dean Stalter is proud to be the Broker of Record for Berkshire Hathaway HomeServices California Properties. He represents the nearly 3,000 agents that make up the company’s presence in Southern California, spanning Santa Barbara down to San Diego. An award-winning real estate veteran, Dean is a great subject matter expert in all things real estate.