What are typical buyer closing costs in San Jose? How much extra money will it take, beyond the down payment, get into that new home in Silicon Valley? The cash needed at the closing table varies depending on many factors.
Today we will offer some general information on home buyer‘s closing costs in Silicon Valley. Different jurisdictions and situations may have additional closing fees.
Typical buyer closing costs – rough estimate
Just need a rule of thumb on the costs? The average closing costs percentage is between one half and two percent of the purchase price, but your actual figure could be substantially more or less, depending on many factors. Most of our buyers pay between .5% and 1%.
Recurring versus non-recurring closing costs
Please note that some fees will be recurring (meaning they will be things you’ll pay again, like property taxes or HOA bills) and others non-recurring (which are one-time fees like title insurance). Where you are in the calendar year can impact fees like property taxes due at closing, too.
Some of the main factors that cause the fees due at closing to rise or fall include:
- loans and related required fees are generally a home buyer’s steepest fee after the down payment
- home buyers who buy down the interest rate with points will see their cash needed to close escrow rise significantly
- whether or not you pay for inspections
- what city you’re buying in
- what type of home, or if it’s in an HOA or not
- and many other smaller escrow related fees, such as if you both fund the loan and close on the same day
- any pest work or other repairs that you pay for on the home prior to the completion of the sale (this is uncommon, but I’ve seen it happen)
- when the next property tax bill is due (you won’t pay more or less, but it’s whether that amount is due at closing or a few months later)
There are online tools that can bring clarity to the typical buyer closing costs, but again only roughly. You will find a closing costs calculator for buyer at ORTC.com, the Old Republic Title Company’s site, and then click on the link for the online netsheets. Or use this link for their online netsheets.
Next we’ll go over what these various typical buyer closing costs can run.
Details on the typical buyer closing costs
Loan costs are often a home buyer’s largest expenses. You aren’t getting a loan, you’re buying it.
- Cash buyers have far fewer closing costs than buyers with financing. Some lenders change an original fee, which might be 1% of the loan amount (sometimes it’s paid by the lender). Often it is paid as a closing cost, but sometimes it is bundled into the loan amount.
- Some buyers opt to buy down the interest rate by paying points (a percentage of the loan, also known as “prepaid interest”). This will result in more cash needed to close. When interest rates are high, this becomes a more popular option. For super motivated sellers, paying these points for the buyer can be a great incentive.
- If you have a mortgage you will be paying for the lenders policy of title insurance. That amount is a percentage of the loan. Check the ORTC link above for an approximate amount in your own case.
- Your lender will require an appraisal and that may be paid in escrow, but technically is a closing cost since you cannot close escrow without it. The appraisal fee is commonly based on the size / value of the home, anywhere from $500 (small condo) to $1500 (large house).
- Sellers normally provide pre-sale inspections available, but if you want to redo any, or have new inspections, that may run you $1200 or more for a home, pest, and roof inspection.
- The typical buyer closing costs are higher in San Jose, particularly in high end homes, due to city transfer taxes. The seller normally pays the county transfer tax.
- Mountain View has a conveyance tax (or transfer tax) and Palo Alto does, too..
- Home Owner Associations (HOAs) have fees for both sellers and buyers. The sellers usually pay for the HOA documents, but the transfer fee or a move in fee might be charged to either or both. Most communities will require 1-2 months of the HOA dues at closing.
- The title company (which is handling the escrow) will have several charges. These often total around $500 to $1000.
- notary fee (a set amount per signature on notarized documents, such as $20 each)
- a mobile notary fee (if they come to you for signing)
- a loan tie in fee (to print the loan papers and organize them)
- recording service fee (they pay someone to go to the county and record the documents)
- possibly a same-day rush fee if the loan funds in the morning and the sale closes in the afternoon
- If you are buying a home warranty, that will be a few hundred dollars.
- You will need to have homeowner’s insurance in place if you have a loan (it will be required). For a condo it’s not as much as for a house. Often the lender wants to see the first year of insurance paid at closing. You could buy extended coverage. Estimate $1000 for a normal sized house in a normal risk area (not high fire, not 100 year flood plain).
- The county will all add more line items to your estimated closing costs sheet, with fees for recording the grant deed and the trust deed (estimate about $175)
What are recurring typical buyer closing costs?
Recurring closing costs will include your proration for property taxes and any HOA dues. Some HOAs require two months of dues paid upfront. If there are common area facilities, you may have a pool key fee or something along those lines.
Property taxes will be around 1.25% of the assessed value each year.
What do inspections cost?
These numbers are subject to change over time. In Santa Clara County, the sellers usually provide inspections, so many of these may seem redundant. Most of our buyers are not getting inspections in escrow, but it is always an option (with or without contingencies).
For most buyers of single family houses, budget in about $1200 for inspections if you want to do the home, roof, and pest. You may need to do other inspections too, though, if something is uncovered in the home inspection. For instance, you may need a heating specialist to look at the furnace, an electrician to estimate repairing safety issues, or other specialists. If you need a foundation or soils expert, it will be very costly. If you are in a remote area of Silicon Valley, you may need well water tested, a septic tank tested, or other atypical inspections and you’ll need to budget in more for these.
Types of inspections and their fees
Property or home inspections are often less expensive when the home is smaller, newer, and there’s no crawl space (usually). A tiny condo might be a couple or three hundred dollars. A large house of 5,000 square feet to 10,000 SF will be far more expensive, perhaps over two thousand dollars. Typical house? About $650-700.
Many home inspectors charge more if there’s a pool or spa as they are required to do a safety check. A 2000 or 3000 SF home with a pool or spa might be nearly $1,000 to inspect, depending on the inspection company.
Home inspectors who provided the pre-sale inspection can also return to the property to do a walk through with the buyers. Often this is about half the cost of the original inspection.
Roof inspections run between about $200 to $300 for most houses, but larger homes or those with special conditions may cost more. Tall buildings, such as a 3 story home, may require an inspector with a drone to see what’s happening that high up and that may be an extra expense.
Chimney inspections usually cost close to $250 too. Naturally the charge will be higher for more than one fireplace or chimney per home.
Pest inspections likewise are less expensive on smaller, younger properties and more expensive on larger, older ones. Typical fee is appx $350.
What about the seller closing costs?
Buyers sometimes wonder how much are closing costs for sellers? Ordinarily the sellers are paying commissions, and that’s the largest dollar amount involved. They are also paying the county transfer tax, the owner’s policy of title, and the escrow fee at closing. Most sellers have already paid for the pre-sale inspections. The seller closing costs are usually many times the amount paid for by the buyers. Some would argue, though, that the sellers’ payments are built into the purchase price.
Other frequently asked questions on typical buyer closing costs and hidden expenses
Beyond the typical buyer closing costs, there are other financial requirements. Top of this list is the required reserves.
Lenders often require some sort of padding in your bank account, called reserves, so that you can manage ok should anything happen in the first weeks or months of your home ownership. Sometimes small down payments come with higher reserve requirements. You’ll need to ask your lender about that. These are not closing costs – it’s your money. The bank just wants to be sure that when you are a new home owner you still have something left in your bank account. Each lender will have a different guideline but some are looking for as much as six months of reserves.
Costs after closing: Are you buying a home “As Is”? If so, expect repairs to be needed even if the home “looks great”. It is not untypical for a house to require about 1-1.5% of the home value in upgrades and fixes, so if buying “as is”, factor that in, especially if there are no pre-sale inspections! Many homes are staged with curtains removed, so you’ll want to budget in the replacement of window coverings, too.
What if I can’t afford closing costs? In some cases, it may be possible to get the closing costs rolled into the loan amount. It’s worth asking. It may also be possible to structure the offer so that the purchase price is a little higher and the sellers cover the closing costs. The risk with that strategy is that the home may sell for more than it might appraise, and that could be another cost.
Finally, when do you pay closing costs? This is done with the balance of your down payment, normally a couple of business days before the close of escrow.
Most of the time, the typical buyer closing costs are under 1%, but if you are purchasing a home in an area with extra transfer taxes or needs inspections, or if you pay points on your loan, it could be much more. For “ballpark” purposes, think 2% of purchase price, but please understand that your costs could be much higher or lower, depending all of the factors listed above.