🧾 Closing Costs: The Other Check You’ll Write

The A,B,C’s of Buying a Home!

Almost every buyer I work with has a down payment number burned into their brain. They’ve saved toward it, tracked it, dreamed about it. Then, about a week before closing, escrow sends over the estimated settlement statement and there’s a second number sitting underneath it. Nobody warned them about that one. Let’s make sure nobody has to warn you.

Myth: The down payment is the cash I need. Everything else gets rolled into the loan.

Truth: Closing costs are separate, they’re due in cash at closing, and on a financed purchase in LA they typically run somewhere between 2% and 5% of the purchase price.

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Here’s the good news up front: in Los Angeles County, local custom puts several of the biggest line items on the seller’s side of the ledger. You are not paying for everything. But you are paying for enough that it deserves a real number in your budget, not a shrug.

Let’s walk the statement line by line.

What the Seller Customarily Pays in LA County

Custom isn’t law — everything is negotiable, and in a hot market some of it gets negotiated. But in Los Angeles County, the standard allocation looks like this:

• The owner’s title policy — the seller pays for the policy that insures your ownership
• The county documentary transfer tax — $1.10 per $1,000 of sale price
• The city transfer tax, where one applies — in the City of Los Angeles that’s $4.50 per $1,000, plus the additional Measure ULA tiers on high-value sales
• Half the escrow fee

Worth flagging, because it surprises people who’ve bought elsewhere: this is a regional custom, not a state rule. Northern California does it differently. When you hear a friend in San Francisco describe their closing statement, you’re hearing a different playbook.

What You Pay: Lender Fees

If you’re financing, this is where most of your money goes.

• Loan origination and points — commonly 0.5% to 1% of the loan amount, though this varies enormously by lender and by whether you’re buying down your rate
• Underwriting and processing — roughly $300 to $800
• Appraisal — roughly $500 to $1,000, and often paid up front rather than at closing
• Credit report — $30 to $50

This is exactly why lender selection isn’t a formality. Two lenders quoting you the “same rate” can be several thousand dollars apart once the fee sheet is on the table.

What You Pay: Escrow, Title, and Recording

• Your half of the escrow fee — on a $1M to $2M purchase, your share commonly lands in the $1,500 to $3,000 range
• The lender’s title policy — the seller covers the policy protecting you; you cover the one protecting the bank
• Notary and recording fees — modest, but real
• HOA transfer fee and document fee, if you’re buying a condo or townhome — these vary widely by association, and some also collect prepaid dues or a move-in deposit

One LA-specific detail worth knowing: in Southern California, escrow and title are almost always two separate companies, so you’ll see two separate sets of charges. In parts of Northern California they’re often combined into one. Different region, different line items.

The Category That Actually Surprises People: Prepaids and Impounds

This is the one that moves the number.

• Prepaid interest — daily interest on your new loan from the day you close through the end of that month
• First year of homeowner’s insurance — paid in full, at closing
• Property tax impounds — your lender collects several months of property taxes up front, commonly three to eight months’ worth, to seed the escrow account
• Prorated property taxes — you and the seller split the current tax period based on your closing date

On a purchase in the $1M–$2M range, prepaids and impounds alone can easily run $15,000 to $30,000.

Here’s the reframe that helps: impounds are not a fee. That’s your money, sitting in an account, waiting to pay your own tax and insurance bills. You’d be paying it either way. It just leaves your bank account earlier than you expected. Origination fees are spent. Impounds are parked.

And Then There’s Due Diligence

Your inspections aren’t technically closing costs — you pay them during escrow, out of pocket, whether or not the deal closes. But they’re real cash in the same window, so budget them together.

A general inspection runs roughly $400 to $1,000. Add a sewer scope, a pest inspection, a pool or chimney inspection, and most buyers land in the $1,500 to $3,000 range for the full workup on a single-family home.

Money well spent, incidentally. That’s the cheapest insurance in the entire transaction.

Credits: Where the Money Can Come From

You have two main levers if the cash is tight.

A seller credit is negotiated as part of the deal — the seller contributes toward your closing costs. It’s most available when you have leverage, which usually means the property has been sitting or the inspection turned up something meaningful. Note that lenders cap how much of a credit they’ll allow, based on your loan type and down payment.

A lender credit is your lender covering costs in exchange for a slightly higher interest rate. It’s not free money; it’s a trade. Whether it’s a good trade depends almost entirely on how long you plan to keep the loan. Under five years, it often is. Over ten, it often isn’t.

What You Can Do

Ask for a full estimated closing statement before you write the offer, not after acceptance. Any competent lender and escrow officer can produce one from an address and a price. That single document turns an abstract worry into a line-by-line number you can plan around.

Then build your cash-to-close budget as three buckets, not one: down payment, plus closing costs at 2–3% for a straightforward financed purchase, plus a few thousand for inspections. If all three are funded and seasoned in your account before you start touring, you get to shop like someone who isn’t nervous — and in a multiple-offer situation, that composure is worth more than you’d think.

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I’m YOUR Real Estate JED.i and I love helping first-time home buyers make their first home more affordable, and I love helping sellers looking to move up to their forever home. Let’s jump on a V.I.P. (Vision & Initial Possibilities) Call and see where you’re at, and I’ll help you figure out next steps to getting you where you want to be!