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Estimating Buyer’s Costs

When you buy a home and get a mortgage in the Bay Area, you will need to pay closing costs, which are the fees charged by both your lender and third parties. Along with owing a down payment on the home and principal and interest related to your own, your closing costs will be due at the time the purchase closes.

In most cases, you will pay the closing costs as the buyer.

Estimating Your Closing Costs

estimating-buyers-costsIn general, you will pay between 2% and 5% of the purchase price in closing costs. This means you will pay between $3,000 and $7,500 in closing costs on a $150,000 home in the Bay Area.

According to a recent survey, the average buyer pays $3,700 in closing costs.

When you get your mortgage, your lender is also required to give you a Good Faith Estimate (GFE) of the closing costs within 3 days of applying for the loan. While this will just be an estimate, and many of the fees can change by up to 10%, it does give you a good idea of what to expect.

Within 1 day of closing, your lender will also give you a HUD-1 settlement statement, which outlines the final closing costs you will pay. It is very important to compare the HUD-1 statement with the GFE to see what changed and why each item is necessary. Many of the closing cost fees are negotiable and some are completely unnecessary.

Estimated Fees on the GFE

The GFE will include estimated charges expected on your loan and closing, such as:

  • estimated-closing-costsOrigination charges and points
  • Credit report fee
  •  Appraisals
  • Title insurance premiums
  • Government charges to record the loan
  • State and local transfer taxes in the Bay Area
  • Hazard insurance
  • Initial escrow balances for property taxes and insurance paid at closing

These estimated fees will not necessarily be what you pay at closing, but there are some charges that cannot change at all, according to law. These fees are the origination fee, points and government transfer taxes. Any fees that change cannot change by more than 10%.

Other Costs to Keep in Mind in the Bay Areacosts-to-keep-in-min

Closing costs are not the only costs you need to worry about. You must also have your down payment ready, which will be at least 3.5% of the purchase price. Your lender will also likely want to see at least two mortgage payments in the bank after closing, but many experts recommend having at least 6 months’ worth of payments in your savings in the Bay Area.