Buying real estate is always an exciting and overwhelming especially for first time home buyers. You should always keep in mind that you will have to bear the closing costs too.
For some people it might take years of savings and planning to accumulate the down payment required for buying house in Los Angeles.
If you are running without proper planning and think that you ‘only’ have to pay down payment, then you will be disappointed.
You will need a lot more than only down payment when buying a house on mortgage. Use our handy tool to calculate your monthly payments beforehand.
Additional to the cash (aka down payment), there are extra costs that you will have to bear to complete the transaction. This is known as closing cost.
Closing costs are for buyers and sellers, both. The amount may differ in both cases.
Today I will be shining light on the closing costs for real estate in Los Angeles so you can plan accordingly and don’t have to face any unexpected delays.
An average closing cost for a buyer in Los Angeles is somewhere between 2% to 3% of the total purchase price.
These fees may differ depending on each transaction.
There could be other factors too, make sure you double check before proceeding with the transaction to avoid any unexpected surprises.
You can save thousands of dollars and your time by working with a local realtor such as Edgar Torossian as your realtor
Normally the tax rate in California is 1%.
Other than this, you will also have to pay additional taxes. We will discuss these at a later stage in this article.
The property taxes comprise of sewer fees, school and college bonds or ‘mello roos’ tax which is for the properties built in the last 30 years (for example after 1993 if you are in 2023).
The taxes does not stop here, buyers will also have to pay prorated property taxes, which depends on the closing time of the transaction. There are seasonal property tax collection deadlines which affect these taxes.
Another options is that you can escrow or impound your taxes with monthly mortgage payments. For this, you will have to add funds in your impound account as well. The minimum funding required is for 3 months of taxes paid upfront in your impound account.
Before a lender proceeds to loan you any amount of money, they will prefer to make sure that the asset where that amount will be invested in is safe and sound. Hence, they proceed with the appraisal which is getting evaluation of the house or any property. This helps them ensure that the money they will be lending will be a safe investment to auction off and recover, only if the borrower defaults unfortunately.
This is done by hiring a professional appraiser to evaluate the property. They will do their work and give an estimated value of the house in the current market.
The fee ranges from $500 to $2000 for a house. It can be more or less depending on the location, size and value of the house.
Escrow fees are paid to the escrow company for all the documentation and paperwork.
How can you calculate escrow fee? Normally there is a base fee of $200 with addition of $2 per $1,000 of purchase price up to $250 base fee plus $2.50 per $1000 of purchase price.
For example, if a house costs $875,000 in LA, the escrow fees would be approximately $1,850 to $2,310.
The fees paid by the buyer to the lender (mortgage company) for the initialisation of the loan is known as mortgage origination fees.
This is variable as discussed before, but you may expect somewhere around $2,000 to in the Los Angeles region.
The pre-paid mortgage interest is the interest amount applicable during the closing time until the end of the first month. This amount is to be paid by the buyer and it depends on the amount of loan amount and % interest.
After this, next payments will be paid according to the mutually agreed schedule between the lender and the buyer.
Looking to calculate your monthly payments? You can get an estimate by using our calculator.
A title insurance is mandatory when buying a home on mortgage. This is for the protection of the buyer from any discrepancies in the owner’s title such as liens or other encumbrances.
On the positive side, only in Los Angeles it is required by the seller to pay for the buyer’s title policy. This turns to be a huge savings for the buyers in in LA compared to other counties in California.
The good news in Los Angeles, compared to other counties, is that it is customary for the person selling a home to pay for the buyer’s title policy. This is a nice savings for buyers relative to other areas of California. So, you’ll only have to pay for the loan title policy out of pocket.
Homeowner’s insurance is the premium paid annually by the buyer to protect the main external and internal structure including anything inside of the home.
The insurance amount is pre paid for the first year at the time of closing to initiate the insurance policy.
The insurance amount depends on the total coverage protection that you will need. It also depends on the lender on how much do they want to insure.
If you do not have a lender, and you are purchasing with 100% cash, it is not mandatory to have an insurance but it is however always recommended to have it.
This will protect you from any unforeseen circumstances incase of partial or complete loss.
But if you are purchasing through a mortgage, then the lender will require you to have the insurance equivalent to the amount of mortgage atleast.
HOA fees refer to Homeowners association fees. These fees are for your local community.
These fees vary in different localities. The HOA fees are to be paid upfront for a few months atleast at the time of closing.
All these are estimates and may vary. You can always confirm them with your realtor before proceeding with the closing.
If you are looking for further consultation, you can contact the top realtor of Los Angeles
The closing costs can be estimated through number of ways.
The lender will provide you with an initial loan estimate for closing a home on your budget.
Then it is the responsibility of your real estate agent to inform you about all types of extra costs applicable on you.
You can also contact us for further information.
If you are well informed and have done your homework, you can save a bit on your closing costs.
There is also a way through which you can save on your saving cost. This can be done by hiring a broker that offers a commission rebate.
This way, you can receive a portion of the commission as a refund and enjoy the savings.
If you are looking for any real estate queries, transactions, listings, looking to buy a home or anything, Edgar Torossian should be your go to person.
Disclaimer: All the numbers and figures are just an estimate. Contact your escrow officer for a better estimate.
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