I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. Call (800) 239-1103.
Understanding Closing Costs in California: What to Expect
Closing costs catch many California buyers off guard. On a $900,000 home — close to the Bay Area median — you could owe $18,000–$27,000 in closing costs on top of your down payment. Here’s exactly what you’re paying and how to minimize it.
What Are Closing Costs?
Closing costs are the fees and expenses paid at the close of a real estate transaction beyond the down payment. In California, buyers typically pay 1–3% of the purchase price in closing costs.
Lender Fees
Origination fee: 0–1% of loan amount. Some lenders charge this; others don’t. Compare carefully — it’s in your Loan Estimate.
Underwriting fee: $400–$900. Covers the lender’s cost to evaluate your loan file.
Appraisal fee: $600–$1,200 in California. Paid upfront, not at closing.
Credit report: $30–$75. Minor but standard.
Title and Escrow Fees
Title insurance is required by virtually all lenders. In California, the seller typically pays for the owner’s title policy while the buyer pays for the lender’s title policy. Escrow fees are split 50/50 between buyer and seller by local custom (though negotiable). Budget $2,000–$5,000 for title and escrow combined on a Bay Area purchase.
Government Fees
Recording fees: $100–$250. Paid to the county to record the deed.
Transfer tax: In California, sellers pay county transfer tax ($1.10/$1,000 of value), but some cities (San Francisco, Oakland) charge additional city transfer tax — confirm local custom with your agent.
Prepaid Items and Escrow Impounds
These aren’t really “fees” — you’re paying expenses in advance. Prepaid interest covers from closing day to end of month (on a $700K loan at 6.5%, that’s roughly $125/day). First year’s homeowner’s insurance is due at closing ($1,500–$3,000+ in California depending on location and coverage). The initial escrow impound account deposit typically covers 2–3 months of property taxes and insurance held in reserve by the lender.
How to Reduce Closing Costs
Several strategies can lower your out-of-pocket at closing: request a seller credit for closing costs (common in buyer’s markets or when negotiating), choose a lender credit in exchange for a slightly higher rate, close near end of month to minimize prepaid interest days, and shop escrow and title — in California, buyers can choose their own escrow company (Section C services on the Loan Estimate).
Frequently Asked Questions
How much are closing costs on a California home purchase?
California closing costs for buyers typically run 1–3% of the purchase price, depending on the loan type, county, and whether you negotiate seller credits. On an $800,000 purchase, budget $8,000–$24,000 in closing costs. FHA loans add an upfront MIP of 1.75% of the loan amount. VA loans add a funding fee (1.25–3.3% depending on service history and down payment). Your Loan Estimate, provided within 3 business days of application, will itemize all fees specific to your loan.
Can closing costs be rolled into a California mortgage?
On a purchase, you generally can’t roll closing costs into the loan — the loan amount is based on the purchase price or appraised value (whichever is lower), not the closing costs. However, you can structure a lender credit, where the lender covers some or all closing costs in exchange for a higher interest rate. On a refinance, closing costs can be rolled into the new loan balance. VA loans allow the VA funding fee to be financed into the loan. FHA UFMIP (1.75%) is always financed into the loan.
Who pays closing costs in California — buyer or seller?
Both parties pay some closing costs. Buyers pay lender fees, their share of escrow/title, recording fees, and prepaid items. Sellers typically pay real estate commissions, the owner’s title insurance policy, county transfer tax, and their share of escrow fees. In some transactions, sellers offer a “seller credit” to cover some of the buyer’s closing costs — this is negotiated in the purchase agreement and reduces the seller’s net proceeds rather than adding to the purchase price.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | Licensed since 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
