Buying a property is one of the most exciting and daunting tasks for any homeowner. However, it can be made easier if you are aware of what to expect when it comes to the closing costs associated with buying a home in Tracy, CA.
Closing costs are expenses that you’ll have to pay when buying a house. They’re broken down into different categories, and the most common ones include federal taxes, state taxes, lender fees, prepaid items (insurance premiums), an origination fee (or discount points if you are using your own money for this purchase).
Closing costs, however, differ based on the property’s location, firms utilized, the selling price, and your ability to negotiate.
In this blog post, we explore what you need to know about closing costs in Tracy, CA.
Overview of Closing Costs
Closing costs are the expenses that arise when purchasing or refinancing a home. They can add up to large sums of money, and they vary from state to state and even county to county.
The purpose of closing costs is to cover services provided by third parties in facilitating the transaction. These costs are not the same as down payment, though they are lumped together in most cases.
Closing costs can be paid by either the buyer or seller, depending on how negotiations turn out at the end of the transaction. This is one of many factors buyers and sellers need to discuss if they decide to sell their properties so it’s important to know what you should expect.
California Closing Costs
The average closing cost in California is $6,878.85 when taxes are included while it’s $5,366.36 when taxes are excluded.
Closing costs for homebuyers in Tracy, CA can be classified as either nonrecurring or recurring.
What are Non-Recurring Closing Costs?
Closing costs that aren’t reoccurring include the one-time fees consumers pay only when they acquire the house. Some examples are as follows:
- Appraisal fee
- Credit report acquisition fees
- Escrow fees
- Home inspection fee
- Mortgage origination fees
- Notary fee
- Processing fees
- Recording fee
- Title Insurance fee
- Transfer taxes
- Underwriting fee
What are Recurring Closing Costs?
Recurring closing costs comprise any fees that will be incurred following the sale of your house. These can include:
- Hazard insurance
- HOA dues
- Mortgage insurance
- Prepaid interest
- Property taxes
Homebuyers in California should be aware of the following closing-related expenses. Additional charges may be incurred if your home-buying status changes. These charges may or may not be included in your closing costs depending on your specific situation.
Tracy, CA Closing Costs
Here are the fees associated with closing costs in Tracy, California
The appraisal fees range from $200 to $300. It covers the valuation of the property, which is necessary for ensuring that both parties are protected.
Loan Origination Fee
This is a fee that covers the cost of processing your loan by the lending institution. The loan origination fee is negotiable, meaning that it’s up to you whether or not you want to pay this fee or not.
If your lending institution is willing, then you would be able to save some money on this fee. In most circumstances, the cost of this fee is between 0.5% and 1% of the loan amount.
Points are also negotiable, but you don’t have as much control over them. The bank will typically charge one point for each percentage that your interest rate is reduced by the mortgage broker.
This means that if they can bring your interest rate down by 2%, then you would owe two points. Here is how you can claim your mortgage points deduction.
What is a Credit Report Fee?
The credit report fee is what you pay for the lender to pull and analyze your credit to determine whether or not they will be willing to give you a loan and at what rate.
This fee is negotiable, but people are rarely able to get this waived. Each borrower will be charged a fee, which is often $25 or more.
Lender’s Title Insurance
This type of insurance insures the lender in case there are any claims on the property after they have made a loan to you.
The Lender’s Title insurance is usually evaluated by your Title Insurance company.
Title Organization Fee
The title organization fee covers the cost of making sure that all of the legal paperwork associated with your transaction is processed correctly and paid for.
You might be able to negotiate this fee, but it’s unlikely.
This is a fee for processing and filing your deed at the local government office in your county of residence. When recording real estate documents or notices, County Recorders in California are required to levy an additional $75 fee per transaction per parcel of real property up to a total of $225.
This applies to anyone other than those that are expressly exempt from payment of recording fees. If you’re looking to save some money on this, then try asking for this to be waived or reduced if possible.
Current Owner’s Title Insurance
When you purchase a home, the previous owner is usually still responsible for ensuring the property until your title officially switches over to you.
This means that they have to pay the premium to keep their policy active, but it will transfer over to you when you close on your house purchase. Title insurance for a Tracy house purchase costs on average $544.
These are items that are expected at closing but can be paid for before the transaction occurs. This might include taxes, interest, homeowners insurance, etc.
Next time you’re looking for homes for sales in Tracy, CA be sure to keep this information in mind so that you can make an educated decision about whether or not this is something that would work for your budget.
How to Reduce Closing Costs in Tracy, CA
When it comes to closing costs, there are a few things that you can do to reduce them.
With closing costs, a lot is at stake. That’s a solid reason to shop around for the best deal. Some closing charges (pest inspection, survey, title search, etc.) allow you to bargain around.
It means you can shop around for a better deal than your lender’s recommended provider. Your Loan Estimate will indicate which closing cost services you can shop for. Do some research, make some calls, and compare prices.
Loan Estimate Analysis
Don’t just skim through the Loan Estimate. Examine each item with the lender, asking what each fee covers and why it costs so much. This helps identify inflated or unneeded expenses. Watch out for costs with the same name, as the lender may be charging twice for the same service.
Processing and underwriting fees are examples. Closing expenses are now more transparent since the Loan Estimate replaced the Good Faith Estimate (GFE), but it’s still worth double-checking.
Bargain fees with the lender
Once you understand the lender’s fees, you may begin haggling. Demand that hidden fees be removed from the final bill. Inquire as soon as possible about your lender’s Closing Disclosure document (detailing your final closing costs).
Ask your lender to explain any inconsistencies between the Closing Disclosure and the Loan Estimate.
Ask the seller for a discount
Some sellers will reduce the transaction price to offset closing costs. Others may be willing to help with closing fees. Depending on the market and the seller’s motive, you may be able to negotiate closing costs reduction.
Delay your closing
Do you remember the pre-paid daily insurance charges? Close at the end of the month to avoid those fees. Plan and aim to close when you need to pay less upfront.
Save on points (when interest rates are low)
If you’re buying at a low-interest rate, you probably don’t need to pay more for points. Points cost 1% of the loan value, so they pile up quickly. You pay it as part of the closing costs. Buying points means staying in the house longer to break even.
Why You Need a Good Local Tracy Agent
Closing costs in Tracy, CA can quickly snowball, but there are several ways to keep those fees as low as possible.
Having a thorough understanding of the local market and well-honed abilities are prerequisites.
You need an experienced Tracy real estate agent in your corner for this very reason.
Trying to do everything on your own will cost you more money than it needs to, and a great local agent will free you for more important matters.