An Explanation of Your Closing Costs
In addition to the purchase price, buyers incur various fees when purchasing real property. They include title and escrow fees, lender fees, points (an optional expense), appraisal fees, credit fees, insurance and taxes.
Title and Escrow Fees
Title fees include both the owner's policy of title insurance and the lender's policy, if the purchase is being financed. Title insurance protects the buyer and lender by insuring against various defects in a property's chain of title. For example, it insures that the persons with the legal right to convey title are the ones who have actually done so.
The escrow fee is what the title company charges for acting as an independent third party in facilitating the transaction.
Other title fees include the notary fee (for notarizing your loan documents), the recording fee (for recording your deed of trust with the county recorder's office), as well as miscellaneous other fees.
In Santa Cruz County, it's customary for buyers and sellers to split the cost of the owner's title policy and the escrow fee 50/50.
For a preliminary calculation of title and escrow fees, visit First American Title's California Residential Resale Fee Calculator.
Lender Fees
Lender fees vary by lender, and can include fees for: underwriting, processing, administrative, document preparation, and funding fees, wire fees, tax service fees, and flood certification fees. Contact your lender to determine which fees will apply to your purchase.
Points
Points refer to discount fees and origination fees. Discount fees are prepaid interest a borrower elects to pay up front to buy down the interest rate. The origination fee is compensation for the loan originator. A point is one percent of the loan amount.
Appraisal Fees
If you're financing your purchase, your lender will order an appraisal, which typically costs $400-$600. In some instances, a lender may require a second appraisal.
Credit Fees
Your lender will charge a nominal amount to run your credit report.
Insurance Fees
Your lender will require that a policy of homeowner's hazard insurance be in place at the time the loan funds. If your property is in a flood zone, that will require additional coverage.
Mortgage insurance may be required by your lender, typically in situations where one lender is financing more than 80% of the property's appraised value.
Taxes
In Santa Cruz County, the seller typically pays the county transfer tax. We do not have a city transfer tax. The seller's county transfer tax is $1.10 per $1,000 in purchase price.
Property taxes are prorated so that each party to the transaction pays their prorated portion of the property taxes, based on the date of close of escrow.
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