A popular question we get asked by clients thinking about buying or selling a home in Arizona is “what will my closing costs be?” Well, the answer to that question is…it depends. There are many factors that could affect real estate closing costs. Although most costs involved in a real estate transaction can be negotiated between buyer and seller, there are certain costs that are traditionally paid by one party.
- Origination Point – if you have agreed to this fee with your lender
- Discount Points – are used to “buy” your interest rate lower. This is known as a rate “buydown”
- Appraisal fee – independent assessment of value of a property
- Credit report – to obtain your credit score
- Flood certification – states the flood zone status of real property
- Pre-paid interest charges – may vary based on the time of month you close
- Mortgage insurance – insurance required when the loan is greater than 80% of appraised value. Typically ½% to 1%. Insurance that protects the lender against loss due to foreclosure.
- Homeowners insurance – required by your lender, also known as hazard insurance
- Property taxes – per diem charges if your property does not close on the 1st of the month
- Title service fees – fee charged for handling funds and documents
- 50% of settlement, escrow fees – fees for the abstract or title search and title examination
- Lenders title insurance – guarantees lender 1st lien position, commitment to insurer.
- Recording fees
- Transfer taxes
- Affidavit of property value
- Tax service fee
- Home warranty – optional warranty package that pays for repairs/replacements of home’s major systems and appliances.
- HOA transfer
- HOA dues
Can you ask the Seller to contribute to closing costs? You could request that the seller pay either a percentage of the purchase price or a set specific amount to contribute towards your closing costs. This is known as seller’s concessions. This is not uncommon and the worst the seller can say is no. All costs are negotiable and subject to what the purchase contract states.
- Commissions – paid by the seller for both parties
- Loan payoff, if balance due
- Owners title insurance policy
- Government recording fees
- Pro-rated taxes
- HOA transfer fees – this is negotiable but typically paid by the seller
- Unpaid HOA dues
- Assessment liens – any liens that were previously placed on the property
- 50% of escrow fees
Taking the first step
The first step to purchasing a property is getting pre-qualified by a lender. The lender will need to know how much you have for a down payment and what kind of monthly payment you are comfortable with. They will determine what you can afford based on your gross income vs. your expenses. Remember, your monthly mortgage payment includes PITI – principal of the loan balance, interest, taxes and insurance.
Always talk to your lender about costs and fees associated with your loan so that there are not any surprises on closing day.
We do not give legal, accounting or tax advice.
If you are interested in Scottsdale homes or golf course communities in Arizona contact us today.