What I Tell Buyers About Closing Costs Before They Fall in Love With a House

Almost every first-time buyer I work with budgets carefully for the down payment and then gets surprised by closing costs. These are the fees, on top of your down payment, that it takes to actually record the sale and fund the loan. I would rather you know the number before you fall for a house than after, so here is the honest version for the East Bay: El Cerrito, Albany, Berkeley, Oakland, Richmond, and the cities around them.

What closing costs usually run

As a rule of thumb, plan on roughly 2 to 3 percent of the purchase price in buyer closing costs. On a $900,000 home that is somewhere around $18,000 to $27,000, separate from your down payment. The exact number moves with your loan, your lender, and the time of the month you close.

Where the money goes

• Loan origination and lender fees: often around 0.5 to 1 percent of the loan amount.
• Appraisal: roughly $600 to $900.
• Title insurance: commonly $1,500 to $2,500, protecting you and the lender against claims on the title.
• Escrow or settlement fees: around $1,500 to $2,000 for the neutral party that handles the money and documents.
• Recording fees: a few hundred dollars to record the deed with the county.
• Home inspection: about $400 to $600, and worth every dollar.
• Prepaid property taxes: depends heavily on when in the tax cycle you close.
• Prepaid homeowner's insurance: often $1,500 to $3,000 for the first year, paid up front.
• Prepaid interest and escrow reserves: the lender collects some interest and sets up an account for future taxes and insurance.

The Consumer Financial Protection Bureau keeps a plain-language guide to closing costs and a Loan Estimate explainer that is worth reading before you sign anything.

A note on who pays what in California

In the East Bay, the buyer typically covers the loan-related costs above, while the seller usually pays the real estate commissions and, depending on the city, some or all of the transfer tax. A few cities here, Oakland and Berkeley in particular, have their own city transfer taxes that can be significant, so the closing math looks different depending on where you buy. I go through this line by line with my clients before we write, so nothing at the closing table is a surprise.

What is actually negotiable

• Seller credits. In a balanced market, and the East Bay has moved toward balance, you can often ask the seller to contribute toward your closing costs. This is one of the most useful tools for a cash-tight first-time buyer.
• Lender credits. Your lender can cover some costs in exchange for a slightly higher rate. Sometimes that trade is smart, sometimes it is not, and it depends on how long you plan to stay.
• Some title and escrow fees. Not all of them, but it is worth getting quotes from more than one title company.

How to keep the number from surprising you

• Ask your lender for a detailed Loan Estimate early, and read it. Every fee is listed.
• Get title and escrow quotes from more than one provider.
• Budget a little more than you think you will need. It is far better to have cash left over than to scramble in the final week.
• Ask your agent, early, whether seller credits are realistic for the specific home and market you are in.

Closing costs are not a trick, they are just a part of the deal that nobody explains until it is too late to plan for. Now you can. If you want, I will build you a rough all-in cash-to-close estimate for any home you are considering so you always know the real number.