A Buyer’s Guide to Closing Costs in Los Angeles

It takes a lot of time to amass the down payment necessary for a house in Los Angeles, and if you don’t do your research you’ll be surprised to find out that you’ll need more than just a down payment.

In addition to the cash you are putting down as the initial equity in your home, there are additional closing costs you will have to pay in order to complete your purchase. Both buyers and sellers pay closing costs, however the amounts and types of fees are different for each.

Below we highlight a quick overview of the real estate closing costs buyers pay in Los Angeles so you can be ready to buy.

Average buyer closing costs in LA

On average, home buyers in Los Angeles will pay closing costs totaling between 2% and 3% of the purchase price. These closing fees will vary from transaction to transaction based on the lender you choose, sale price, size of the mortgage loan, location, property taxes, and other details specific to the home.

Largest buyer closing costs in LA

• Mortgage origination fees
• Pre-paid mortgage interest
• Appraisal fee
• Property taxes
• Escrow fees
• Title insurance (not applicable)
• Homeowner’s insurance
• HOA fees (if applicable)

Mortgage origination fees

Mortgage origination fees are paid to the mortgage company by the buyer for the costs associated with the underwriting of the loan. This fee will vary from lender to lender but homebuyers in Los Angeles can expect these fees to total between $1,800 and $2,200.

Pre-paid mortgage interest

At the time of closing, you will be responsible for pre-paid mortgage interest. This is the amount of interest due from the time of closing through the end of the month. The total of the pre-paid mortgage interest will depend on the size of your mortgage and the interest rate on your loan. 

After closing, you will begin paying your monthly payments to your lender on the agreed upon schedule. The monthly payment will include both interest and principal if you are using a conventional, amortizing mortgage.

Appraisal fee

Before lending you the money to purchase a home, the lender will want to determine that the property is worth at least what you are paying for it. To do so, the lender will hire a licensed appraiser to perform an appraisal to give an independent opinion on the value of the home. 

The appraisal fee is the amount the bank charges you for hiring the appraiser. The cost of an appraisal is approximately $500 to $1,000 for a single-family home and will vary based on the size of home.

Property taxes

California has a typical tax rate of one percent. However, this does not mean you will pay only one percent. There are additional property taxes, also known as special assessments, that are attached to your property. 

These property taxes range from sewer fees, school and college bonds. If your property was built in the last thirty years, it’s possible you will also have to pay "mello roos" which are property taxes that finance infrastructure, in a newer community or subdivision. 

At closing, buyers will pay prorated property taxes, depending on when the transaction closes relative to seasonal property tax collection deadlines. If you choose to impound or escrow your property taxes along with your monthly mortgage payments, then in addition to proration, you will have to fund your impound account as well. 

An initial funding will equate to between 3 months and 8 months of property taxes paid upfront into your impound account with the bank.

Escrow fees 

Escrow fees are the payment for document preparation services provided by the escrow company settling the transaction. These fees for buyers range from $200 base fee plus $2 per $1,000 of purchase price up to $250 base fee plus $2.50 per $1,000 of purchase price, and will vary based on the escrow company you choose.

For example, if you purchased a $1,750,000 home in LA, escrow fees would total between $3,700 to $4,625.

Title insurance

When purchasing a home with a mortgage, buyers are required by their lender to have a title insurance loan policy. This is distinct from the buyer’s or owner’s policy. The premium for this loan policy is a one-time fee and protects the lender from any defects in the owner’s title such as liens or other encumbrances.

The good news in Los Angeles, compared to other counties, is that it is customary for the person selling a home to pay for the buyer’s title policy. This is a nice savings for buyers relative to other areas of California. So, you’ll only have to pay for the loan title policy out of pocket.

Homeowner’s insurance

Homeowner’s insurance is the annual premium paid to protect the structure of the home as well as the contents inside. At time of closing, you will pre-pay the first year’s premium to have the policy in place.

The amount of homeowner’s insurance coverage a buyer needs will depend on how much protection you want, as well as the requirements of the lender if you are purchasing the home with mortgage financing.

If you purchase a home all-cash, you are not required to have homeowner’s insurance, but it is always recommended to carry at least enough coverage for the replacement cost of the home plus the value of your possessions inside. On the other hand, If you purchase a home with mortgage financing, your lender will require you to have homeowner’s coverage equal to at least the value of the mortgage. This is meant to protect the collateral of their loan.

HOA fees (if applicable)

Homeowners association fees, commonly referred to as HOA fees, can be a controversial topic. While some homebuyers enjoy all of the amenities that are part of being a member of a community, other property owners prefer not having the additional fees of living in such a community.

If you are buying a home or condo with regular monthly or quarterly HOA fees, be aware that you will pre-pay the first month or first few months upfront at the time of closing. The amount you can expect to pay will vary depending on the rules of the homeowners association.

Closing Costs Los Angeles Home ($1,750,000 price, 20% down payment)

• Mortgage origination fees: $14,000 or 1% of loan amount
• Lender’s Fees $1,800 to $2,200
• Pre-paid mortgage interest: 2,000 to $2,500
• Appraisal fee: $950
• 6 months Property taxes: $11,000
• Escrow fees: $ 3,700 to $4,600
• Title insurance lender policy: $2,500
• Homeowner’s insurance: $5,000
• HOA fees (if applicable): $300-$900/month

How to estimate closing costs 

There are several ways you can estimate your closing costs. First, your mortgage lender will provide an Initial Loan Estimate for closing costs on a home purchase in your budget. Second, your real estate agent will be able to educate you on the types of closing costs most applicable in your area. Finally, there are closing costs calculators available on the internet to provide you with a ballpark estimate so you can plan your savings goals prior to buying.

How to save on closing costs

All of the closing fees on your home purchase can really add up, but the way you can offset these closings costs is by hiring a buyer’s broker that offers a commission rebate. That’s right, you can receive a portion of your broker’s commission cash back.

Prevu, a tech-enabled brokerage in Los Angeles, offers up to 1% of your purchase price back to buyers with the company’s Smart Buyer Rebate. For example, if you purchase a $2,000,000 home with Prevu, you could receive up to $20,000 back after closing.

Prevu Real Estate, Inc. is a licensed real estate broker in California, license number 02134758.