By The Mortgage Planners

07/20/2013 If you are looking to buy a home in San Diego, one of the first things you will want to ask your San Diego Mortgage Broker is, “What are my closing costs going to be”. This will be an important factor in determining the maximum purchase price you can afford.



As you are in the process of seeing what you can afford or getting pre-approved for a San Diego Home Loan, the closing cost you will be required to pay will have an impact on the funds available for a down payment and the reserves the lender may require.



Typical Closing Cost
The closing costs for a San Diego Home Loan consist of fees from multiple services like the lender, escrow, title, and appraiser. Below is a breakdown of typical fees that you may see from each of these services:
Lender – The lender fee usually consists of Underwriting, Processing, and Loan Document Fees.

Here are the average costs:
Underwriting: $550
Processing: $595
Loan Documents: $270
Escrow – Escrow fees can differ depending on the escrow company that is chosen in the purchase contract. The largest escrow fee, the Settlement or Closing Fee, is based on the purchase price and is usually split 50%/50% with the seller. It is calculated using a base fee amount of $350 plus $1.50 per $1,000 purchase price per buyer and seller. For a purchase of $600,000 the settlement fee would be approximately $1,250.

Other fees that escrow may charge include:

Notary: $150-$200

Escrow Tie In Fee: $125-$200

Document Fee: $50-$100

Messenger Fee/Wire Fee: $45-$75

Title – Title fees can also differ depending on the title company chosen in the purchase contract. The two largest title fees are the Owner’s title policy, which is typically paid for by the Seller, and the Lender’s Title policy, which the buyer pays. The charge for the Lenders Title Policy is based on the loan amount. For a $300,000 loan amount the Lender’s Title Policy will cost $487 and for a loan amount of $400,000 it will cost $556.



In addition title may charge the following items:

Sub Escrow Fee: $150
Endorsement Fee: $100
Wire Fee: $45



Appraisal – The appraisal fee can also depend on the value of the house and how difficult of an appraisal it will be. Usually, the appraisal fee is about $450, but for homes above $750,000 you could see an extra charge.



Miscellaneous Fees – There are some other common fees as well:

Credit Report: $30
Tax Service: $69
Recording: $125



Origination Fees or Discount Points are another potential fee a buyer may be charged as part of a purchase. Some San Diego Mortgage Brokers may charge a 1 point origination fee (which equals 1% of the loan amount) as part of their normal fees. The Mortgage Planners do not do this. The only time a buyer would pay points, is if they wanted to pay a discount point to buy down the interest rate. The discount points can vary depending on how much the rate is bought down.

Closing Costs Can Vary Depending on Loan Program and Purchase Price
The total closing costs can vary depending on the loan program chosen for the San Diego Home Loan. For example, if a San Diego VA Loan is chosen, there will be a Funding Fee that can be paid at closing or added to the loan amount. Depending on how the loan is structured, the seller may have to pay certain costs for the buyer.



San Diego Jumbo Loans will typically have higher closing costs because a more expensive house is being bought and a larger loan is used, so escrow and title fees will be higher. The appraisal will also cost more. In some cases we may need to have a 2nd appraisal if the loan amount is over $1 million.



Many Realtors will tell buyers that closing costs are about 3% of the purchase price. That number can be high depending on the purchase price. As the purchase price goes up, the percentage of that price going to closing costs goes down. For example, at a purchase price of $250,000 the closing costs, not including any pre-paid items, account for 1.85%. At $500,000 it is 1.15% and at a price of $720,000 it is .85%.

Pre-paids Are Not True Closing Costs
There are other expenses that a buyer will need to pay at the time of closing that are not true closing costs. These are called pre-paid items and can include property taxes, homeowner’s insurance, HOA fees, and pre-paid interest on the new loan. The buyer will need to have funds available to cover these expenses as well.



Property taxes can be collected for 2 different purposes at closing. The first would be for any pro-rated taxes due. This covers any taxes that are due at the time of closing on the purchase and are usually based on the seller’s current tax base. If the seller has already paid the first half installment of property taxes for the period the sale occurs in, then the buyer will have to reimburse the seller for the period they are living in the house that was covered by the 1st installment payment.



Property taxes would also be collected for future tax bills if the buyer has chosen to have an impound account. In this case, depending on the month the sale closes, the lender may collect 1-7 months worth of property taxes calculated with the new buyer’s tax base. This money will be put in the impound account for the next property tax bill.



The buyer will also have to pay a full year premium for their homeowner’s insurance at the time of closing. In addition, if they choose an impound account, they will have to pay an additional 2 months.

Pre-paid interest will be due from the date the new loan funds until the end of the month because the first mortgage payment will not be until the 2nd month after the closing. For example, if the loan funds on April 15th, pre-paid interest will be collected from the 15th to the end of the month. The first mortgage payment will not be due until June 1st.

Seller and Lender Credits Most loan programs will allow the seller to credit a certain percentage of the purchase price to the buyer for closing costs and their pre-paid items. The lender can also give closing costs credits, usually as a trade off for a slightly higher interest rate. Either of these options could help a home buyer who has enough money for a down payment, but not enough to cover the extra closing costs.



If you are considering buying a home or have any questions, please feel free to contact me at 619-312-0612. If you need to get pre-approved, you can click HERE to fill out a secure online application. You can also request a free rate quote HERE, to help you determine what your monthly payment will be. I am happy to assist you to find the right loan for your new home.