Closing Costs on a California Purchase, Line by Line

Closing costs are what you pay to become the owner besides the down payment. On a California purchase they show up as lender charges, an appraisal, title and escrow, recording, transfer taxes, prepaid interest, insurance, and tax impounds. The stack is large enough to plan. It is not a flat percentage borrowed from a headline.

Who pays which line is the part people get wrong. In much of Southern California, custom has the seller buy the owner's title policy and the two sides split escrow. That is custom, not a statute. Northern California custom often differs. Your contract can follow custom or assign a fee the other way. Read the offer before you trust a proverb.

Lender charges and prepaids

The lender section commonly includes an origination charge or other lender fee, the appraisal, a credit report, and any discount points you chose. Points are optional only if that loan offer says they are. Ask for a Loan Estimate early and a Closing Disclosure before you sign, and compare the two line by line.

Prepaid interest covers the days from closing until the first payment period starts. Impounds, if the loan has them, collect a cushion for taxes and insurance. That money pays your future bills. It is not a fee the escrow holder keeps. If you hope to skip impounds, confirm that this lender allows it at your down payment.

Title, escrow, and transfer taxes

Title charges can include the lender's policy, which protects the lender, and the owner's policy, which protects you. Escrow is the neutral work of holding funds, paying the parties, and recording the deed. Notary and recording fees are smaller and still real. Ask which of these your contract assigns to the buyer.

Documentary transfer taxes depend on the county, and some cities add their own. Custom about whether buyer or seller pays is local, and the purchase agreement is where your deal states it. Do not assume a Los Angeles custom applies in Riverside County or Orange County. Read the line, then read the city.

The bills that show up around closing

Budget for the homeowners policy if the lender wants the first year paid at closing, and for prorated property taxes. A supplemental bill often comes later, because the sale resets assessed value and the proration frequently uses the old bill. Set cash aside for it. It is not an error on the closing statement.

Inspections you order may be paid outside escrow. HOA transfer fees, document fees, and prorated dues appear when there is an association. Mello-Roos is usually an ongoing tax, though a proration can show up. Ask escrow for an estimated statement while you still have a contingency, and question any line you cannot name.

Before you act

By Nick Valmores, NJV Realty. This is general education for California residents, with examples from the Inland Empire, the San Gabriel Valley, Los Angeles, and Orange County. It is not legal, tax, lending, or insurance advice. City rules, county custom, and program details change. Confirm your situation with a California-licensed real estate broker and, when money, title, tax, or insurance is involved, with your own attorney, CPA, lender, or insurance broker. Equal Housing Opportunity.