Are you thinking about buying a house and wonder how much you’ll pay in closing costs? In this video, I’m going to walk you through typical closing costs when buying a home here in San Diego. I’ll explain how understanding these fees will help you budget and be best prepared to snag a great deal.
Down Payment And Title Fees
The good deals in San Diego go fast, so it’s super important that you are prepared. By knowing all about your closing costs, you’ll be ready to rock and roll as soon as you find the house that’s right for you.
Your first and biggest out-of-pocket expense is known as your down payment. While your down payment is not a true cost, it’s going to feel like one when it leaves your bank account. It will go towards the equity in your home and plays heavily into what kind of price range, home, and location you’ll look at.
Aside from the down payment, let’s talk about the actual costs of the home buying process here in San Diego. Some of the first things you’re going to see on your closing statement are title fees. Title fees are charged by a company that searches the history of the property to ensure that you have a clear title. This means that whoever legally owns the house has the right to sell the house.
With a clear title, the bank feels comfortable lending you the money because they have confirmation that whoever owns the house can legally sell it to you. Since your lender will require that clear title, the title company will charge your lender the fee. And guess what? The lender is not going to pay it. They’re going to pass that on to you.
Escrow And Miscellaneous Fees
Another line item you’re going to see on your closing statement is escrow. Escrow is a neutral third party that technically works for both the seller and the buyer like Switzerland. They hold monies, disperse monies, collect documents, and disperse documents. We get charged for all that.
You will close your property with an escrow company, and your property will be insured with a title company. Escrow fees will vary depending on the purchase price. Everything in real estate is always dependent and is usually a percentage of your purchase price. We’ll talk about that before we go looking at your potential home so you have a great idea of what to expect.
The next nebulous item you’ll see on your closing statement are miscellaneous fees associated with the loan on your purchase. While each lender is going to have their own fees, you’re going to be paying for the lender to process and fund your loan in the end. While all the little steps in between should be line items, some won’t. These are the miscellaneous items.
Estimates, Taxes, And Inspections
One of the first things you want to do when you go through the pre-approval process with your lender is to find a ballpark figure for your closing costs. While they’re going to be different based on the exact purchase price of your home, you should get a close estimate. This will help you set your expectations as you move forward.
Another line item you’re going to see on your closing statement is the property transfer tax. Just like everything else bought or sold, there is a tax. In San Diego County, the rate is $1.10 per $1,000 of the purchase price. So if you buy a home for $500,000, then you can expect roughly $550 in transfer tax. This will be due payable to the San Diego County Treasurer’s office.
Another cost that you’re going to have (which won’t be on your closing statement) is your home inspection fee. This is part of the home buying process. Did you know that the average time a person spends in a home before they decide to buy it is about 15 minutes? This is why it’s super important to do a home inspection. We’re going to test all the big systems of the house and look at the roof, foundation, electrical, and plumbing to make sure that you’re buying something that works, is functional, and safe.
Your Total Closing Costs
I hope this gives you a good idea of what to expect for closing costs when purchasing a home here in San Diego County. It’s best to budget between 1.5-2.5% percent if you want to be conservative. It’s very doubtful it’ll be more than that. A big share of those closing costs—about 70%–is related to the loan fees. So if you’re going to be a cash buyer, your closing costs will be quite a bit less.
If you’d like to get a more accurate idea of what your closing costs would be, please feel free to give me a call or shoot me a text or email and I’ll be happy to help. I can give you a more accurate number based on where you’re looking and what your budget is. If you don’t have a lender, I’ll also introduce you to a great one who will make sure that those closing costs are as little as possible.
And remember, make sure to subscribe to my channel so you never miss a future episode all about San Diego real estate!