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Expenses to expect during your home purchase

Roseville, Calif.- Your down payment isn’t the only thing you need to bring to the closing table when you buy a home. Closing costs are expenses you pay in exchange for services associated with finalizing the sale. Many first-time home buyers don’t know about or underestimate just how much they’ll need to pay in closing costs and cash for the appraisal and inspections.

What Are Closing Costs?

Closing costs are an accumulation of separate charges paid to different entities for the professional services associated with the buying and selling of real property. For a buyer, they usually include fees to your lender, including the cost of an appraisal, escrow charges, title insurance premium, inspections and mortgage prepaid expenses. The bulk of closing costs are paid at time of closing along with your down payment.

How Much Are Closing Costs?

Closing costs in California generally range between 2 to 3 percent of the purchase price. This means that if you purchase a home for $500,000, you can expect closing costs to be about $10,000 – $15,000. Closing costs don’t include your down payment. In the past we were occasionally able to negotiate with the seller to get a credit to cover some of the buyer’s closing costs. With the current “seller’s market” this option is very rare. Many listings are getting multiple offers and sellers have been reluctant to provide any credit. If you don’t have funds for closing costs, this in not the time for you to buy.

Out of Pocket Expenses

Although most closing costs are paid at the close of escrow there are some cash requirements during the escrow. To open an escrow an Earnest Money Deposit is required. Earnest money is put down before closing on a house to show you are serious about purchasing. It’s also known as a good faith deposit. This goes to the escrow company and is refundable or used to cover a portion of closing costs. The amount of the EMD is a function of the negotiation with the seller but is generally 1 percent of the purchase price. This amount must be deposited to escrow within 3-days of the offer being accepted or otherwise negotiated. The other out-of-pocket expenses are paid to third parties for the appraisal and any inspections the buyer wants.

Point to Remember

In addition to your down payment budget between 2 and 3 percent of the purchase price to pay closing costs. Do not depend on your lender or the seller to pay your closing costs.

Julie Jalone

Realtor Julie Jalone

If you have any questions about selling your home this winter, feel free to contact me at the MagnumOne Realty Office in Roseville or by email to juliej@jalone.com. I would be happy to answer your questions.

We specialize serving the needs of buyers and sellers of homes in the Sacramento area including Sacramento, Placer, El Dorado, Sutter and Yuba counties.