Discover What You Really Need to Know About Rancho Cucamonga Closing Costs
Rancho Cucamonga closing costs – be sure to factor those in.
More often than many people realize, home buyers (and sellers, too) fail to fully factor in to their cost calculations closing costs. The cost of buying a home goes beyond the down payment and monthly mortgage payments, and the cost of selling a home – and, yes, there is a cost – includes more than the agent fees/commission.
It’s important, then, for those involved in a real estate transaction to have at least some understanding of closing costs. So read on to discover what you need to know about closing costs in Rancho Cucamonga.
What Are Closing Costs?
Closing (also known as “the settlement) is the final step in the process of selling/real estate. It’s that point at which money changes hands, dotted lines are signed, ownership is transferred, and the buyer walks away with keys in hand.
And, of course, various fees and costs are paid by both buyer and seller before the transaction can be fully finalized. For buyers, the closing costs usually fall into two categories: loan-related costs and ownership-associated costs. Sellers are typically responsible for other closing costs, usually agent commissions and fees associated with transfer of ownership.
Although these fees vary from lender to lender, there are some common ones such as loan origination and processing fees. Pre-paid interest is another and usually includes only the days left in the first month’s billing period.
These are fees that go to pay all the professionals and service providers, such as inspectors and attorneys, involved in the transaction and what led up to it. Though not large taken individually, these fees can add to a substantial amount.
Home Ownership-associated Fees
Typically, these fees include homeowners insurance, property taxes, HOA dues (when applicable), and escrow-account fees. (Mortgage lenders often have escrow accounts for borrowers in order to minimize their lending risk.)
For sellers, the most significant of the closing cost the agent commissions, typically to both the seller’s and buyer’s agent. Standardly, the total is about 6% of the sale price.
Title Search and Insurance
There are also the costs of the title search and the lender’s title insurance policy, typically paid by the seller.
Who Pays Closing Costs?
As we’ve mentioned, certain portions of the closing costs are paid by the buyer and others by the seller. So let’s examine some of the particular costs to see who pays exactly what with respect to Rancho Cucamonga closing costs . . .
As it relates to the buyer, a quick estimate of . . . costs would reveal a range between 1-3 percent of the sales price, with most of this . . . going to . . . fees charged by the lender.
First is the charge for “points.” “A lender may charge a fee, known as a point that is equal to one percent of the loan amount. The point could be categorized as either a discount point or an origination point. The difference between the two is that a discount point is a point paid to the lender to lower the interest rate on the loan. An origination point, on the other hand, is a fee that is paid to the lender to compensate them for actually doing the loan.”
Then buyers will also pay various lender- and mortgage-loan related costs. “[B]uyers will . . . pay the lender a credit report fee and are also responsible for their share of prorated property taxes. Generally, buyers will also pay for a title insurance policy covering the lender. This is different than the owner’s title insurance policy . . . described above that the seller paid for to protect the buyer.”
And there are escrow fees. “[I]t’s important to note that there’s usually a base escrow fee of between $200 and $400 and then the escrow fees themselves are often $2-$3 per thousand per side. Larger real estate transactions of several million dollars might have a lower per thousand escrow fee.”
Typically, sellers wind up paying around 6% to 8% of the property’s sale price, with most of it going to agent commissions, usually about 4% to 6%. “The other 1 to 3 percent may be in other closing costs like back property taxes that are owed by the seller that will have to be paid at the close of escrow.”
“Even if the property taxes are not delinquent, these taxes are a seller responsibility until the escrow closes. For example, if the transaction were to close on April 10th, the property taxes up until April 10th would the responsibility of the seller. Anything after that date would be passed to the buyer side of the closing. Sellers will also have to pay their share of escrow fees and any back homeowner association dues until the date that the escrow closes.”
Sellers will also pay for any needed repairs successfully negotiated by the buyer. “A home inspection, for example, might reveal that a roof is leaking and instead of the seller fixing the roof, the buyer may ask for a $7,000 credit to fix the roof in lieu of the actual repair. This would be deducted from the seller’s proceeds at the close of escrow.”
Breakdown of Rancho Cucamonga Closing Costs
Here, then, is a breakdown of all the standard closing costs for California in general and Rancho Cucamonga in particular:
- Underwriting fee
- Processing fee
- Origination fee
- Credit report
- Flood life of loan fee
- Tax service fee
Title Fees and Taxes
- Lender’s title insurance
- Owner’s title insurance
- Recording fee
- State tax
- Intangible tax
Prepaid Interest and Escrow
- Real estate tax escrow
- Insurance escrow
- Deposit/earnest money
- Secondary financing amount
- Costs paid by seller, lender, and/or third party
Important Takeaways About Rancho Cucamonga Closing Costs
Some common points of confusion (or at least where knowledge is often lacking) bring us to these closing-cost takeaways . . .
NOT the Same as the Down Payment
“A down payment is an amount of money you hand over to your mortgage lender as an advance payment on your mortgage. . . . While this money is usually paid when you sign off on the loan paperwork, it’s not considered a closing cost.”
Based on the Size of the Mortgage Loan
Closing costs can vary somewhat depending on the particular lender and the area/state, but “the baseline for calculating them is still the same. Typically, they can run anywhere from 2% to 5% of the home’s purchase price. That means for every $100,000 you pay for a home, you’re looking at $2,000 to $5,000 in closing costs.”
Your Right to Know
Shortly before the actual closing date, buyers should receive from their lender a loan estimate that details what the costs should be and all the specifics. Some elements can change, but others, such as the loan origination fee and interest rate, remain fixed.
“[I]t’s a good idea to go through every fee to make sure you’re not being charged an unreasonable amount. If you spot something that seems inflated or you don’t understand what a particular fee is for, it’s best to contact the lender for a more complete explanation.”
Potential to Get Seller to Pay
Typically, buyers carry most of the closing-costs burden, but they may be able to get the seller to assume some or even all of the expense. It all depends on the type of loan and what the local market is like. Under the right conditions and with some top-negotiations, though, it is a real possibility.
Why You Need a Good Local Agent
Rancho Cucamonga closing costs are inevitable and need to be taken into account.
Although the loan-related aspects are pretty well cut and dried, much of the rest is negotiable. And, as we just indicated above, a skilled negotiator in the right market may be able to get some concessions – getting the seller to pay some or all of the rest of the buyer’s portion.
That’s precisely why buyers (and sellers) need an experienced local real estate agent in their corner.